70% of Calif. Small Businesses Could See Rate Changes in 2016

About 70% of California small businesses could be affected by upcoming rules that require them to offer health coverage that complies with the Affordable Care Act, the Los Angeles Times reports (Zamosky, Los Angeles Times, 4/12).

Background

Under the ACA, all health plans must include 10 essential benefits, including hospitalization, prescription drugs, maternity care and mental health treatments. The law's employer mandate provision stated that any health plans that do not meet all 10 requirements would be canceled at the end of 2014.

However, in July 2014, Gov. Jerry Brown (D) signed into law a bill (SB 1446) that gave state businesses with fewer than 50 employees an extra year to obtain ACA-compliant health coverage.

If the eligible businesses' sponsored health plans still do not meet the law's requirements at the end of 2015, such plans will be canceled (California Healthline, 7/8/14).

Patrick Burns, president of the California Association of Health Underwriters, said, "Most of the small group plans that had larger-than-average rate increases by switching to ACA plans [instead] grandmothered their plans" to avoid higher rates.

Potential Rate Changes

According to Burns, small businesses that "grandmothered" health plans that were in place before 2014 likely will face rate changes at the end of this year.

However, it is unclear what rate changes will occur, according to the Times.

For example, the ACA bars insurers from charging higher premiums based on employees' health. Therefore, "Some companies who have had healthy employees may see their rates go up, and some who have had sicker employees may see them go down on average," Gary Claxton, a vice president at the Kaiser Family Foundation said.

Despite the upcoming rate changes, experts say that small businesses likely will continue to offer employee health benefits.

Anthony Lopez, manager of small business at eHealthInsurance, said, "The small-group market hasn't slowed down," adding, "We've seen an increase in the number of groups we've placed with an insurance company" (Los Angeles Times, 4/12).