As 2015 draws to a close, you’ve probably already started thinking about your company’s health plan requirements for next year. If you’ve kept up to date with ACA regulations, you’ve probably heard the term “transition relief”. But what does this mean, exactly, and how does it apply to your business?
To understand in full, know that beginning in 2016, businesses with 51–100 employees will start to be considered part of the “small group” employer class per the Affordable Care Act’s definitions. However, an amendment to the ACA, called PACE (Protecting Affordable Care for Employees), was signed by President Obama in October 2015. PACE allows some states to continue to designate companies with 51-100 employees as large-group in 2016.
For everyone else, though, all-new group plan options for businesses in this employee range must be ACA-compliant (meaning they’re community-rated, have no medical underwriting and include the required additional coverage). For some employers, this will be a welcome change. However, analysts predict that more than half of applicable employers will see a rate increase of 18 percent or more because they will no longer receive the healthy discounts that risk rating provided.
In addition to PACE, Congress has opened another route to provide relief to businesses that may not immediately realize the positive impacts of this ACA law. Many states allow 51–100 employer groups to keep their current health care policies and delay the move to ACA-compliant plans until October 1, 2017. This option to delay is called transition relief. Here’s how it works: Groups with 51–100 total employees that change insurance carriers on January 1, 2016, or later are required to start using ACA-compliant plans. If a state offers transition relief, however, the health carriers in that state may choose to offer an extension to these businesses to stay on their policies through the October 2017 deadline.
Advantages for Small Group Businesses
Why is this option an advantage for businesses in that 51–100 range? There are three key reasons:
- Several carriers in eligible states, such as Anthem Blue Cross and Blue Shield, are allowing employers to lock in rates in advance of their next renewal to take advantage of transition relief.
- Transition relief allows employers more time to figure out the best solution that fits their employee and business needs prior to moving to a community-rating environment.
- Employers are able to keep their plans longer. This helps your workforce adjust because small-group rules require plan designs to fit into one of the metal plan tiers, so the new plan designs may not be what employers are used to seeing.
These 51–100 groups can continue to elect non-ACA metal plans through December 1, 2015, but keep in mind that employers in that employee range that are moving carriers on January 1, 2016, or later will need to move to ACA plans (unless they are in states that take advantage of PACE, in which case they are off the hook for another year). If you want to consider the relief option, it will be important to secure coverage well ahead of the deadline with the carrier that will best meet your needs. If this sounds like an option you may want to take advantage of, you should check with your broker or agent to see if your state offers this extension. The following Anthem states allow transition relief, and Anthem will be communicating options to employers soon:
- New Hampshire.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.