On January 1, 2014, a number of the Affordable Care Act’s (ACA) more significant provisions will go into effect. This means that many employers renewing their health plans on or after January 1st can expect big changes to their plans and, most likely, their premiums. However, some small group employers (typically those with no more than 50 employees) may have the option of delaying these expected changes with off-cycle renewals.
Off-cycle renewals allow employers to change the renewal date of their health plans. Since some of the ACA’s 2014 changes do not apply until the renewal date, health plans renewing earlier in the year will experience premium increases sooner than those renewing later in the year. Regardless of a plan’s natural renewal date, an off-cycle renewal can change a plan’s renewal date to late 2013, thereby effectively delaying implementation of the changes, and the expected premium increase, until late 2014.
With off-cycle renewals, employers may be able to delay the impact of several ACA provisions that are expected to increase premiums, such as:
- Premium Rating Restrictions (Community Rating). Restrictions on the ability of health insurance issuers to determine premium rates based on health status, gender or other factors. Only age, rating area, family coverage and tobacco use may be used to vary premiums.
- Essential Health Benefits Requirement. Health plans offered in the small group markets must cover all of the Essential Health Benefit Categories.
- Guaranteed Availability of Insurance. Requires guarantee issue and renewability of health insurance regardless of health status.
- Pre-Existing Condition Exclusions. Insurers will not be able to exclude employees from coverage based on pre-existing conditions.
- Cost-Sharing Restrictions. Limitation on annual deductibles and maximum out-of-pocket expenses.
- Elimination of Annual Limits on Insurance Coverage. Though lifetime limits on most benefits have been prohibited since 2010, beginning January 1, 2014, annual dollar limits will also be prohibited.
Whether an off-cycle renewal is an option for a particular employer depends on several factors.
- Size of Employer. Off-cycle renewals are currently being offered to small group employers, which are typically employers with no more than 50 employees, though some employers with up to 100 employees may also qualify.
- Insurance Company. Insurers decide whether they want to offer off-cycle renewals and to whom. Some insurance companies have decided to not offer off-cycle renewals and other are only making them available to specific clients.
- Natural Renewal Date. Plans that naturally renew late in the year may not experience sufficient benefits to justify an off-cycle renewal.
Since an off-cycle renewal essentially continues an employer’s current plan, various changes required by the ACA will not affect the premium. However, plans will still be subject to their insurer’s regular medical underwriting process, so employers may still experience a premium increase. Continuing under a current plan also means that employees will not have access to various coverage provisions required by the ACA.
Though there doesn’t seem to be anything in the ACA expressly prohibiting off-cycle renewals, federal regulatory agencies may decide to address and possibly prohibit the practice of manipulating renewal dates. Employers must also ensure compliance with various laws that may be implicated by changing a plan’s renewal date, such as the Internal Revenue Code and ERISA.
Those considering an off-cycle renewal must act soon. Many insurance companies are imposing strict deadlines by which employers must request an off-cycle renewal. Since this can be a lengthy and complicated process, now is the time to get started.
If you would like to see if your health plan would benefit from an off-cycle renewal, please contact us.
If you would like to subscribe to our newsletters please click here.