Employers Should Ask Their Insurance Agents Whether Early Renewal Of Health Insurance Coverage Is Appropriate

While one of the greatest benefits of the federal Affordable Care Act ("ACA") is better access for all to quality healthcare, theoretically resulting in lower health care expenditures, there also are costs associated with the ACA. Many of these costs take the form of additional fees on participating insurers and health maintenance organizations in our nation's healthcare system.  The federal government will impose many of those fees beginning in calendar year 2014.  In general, these fees will only apply to the months of coverage that occur in calendar year 2014, but the cost to the employer will be spread out over the entire policy/contract year.  These fees will be passed along to employers in the form of premium increases.

There also will be additional operational cost impacts that only apply to health insurance policies or health maintenance organization contracts that become effective (or are renewed) on or after January 1, 2014. It is expected that changes such as these will result in very large premium increases for many employers, especially some small employers.   These premium increases will be especially large for employer groups that have younger and healthier employees.  All of these factors will lead to greater costs to provide insurance to employees, and will increase the cost of the insurance premium paid for the coverage.

To help mitigate the ACA's impact on their health insurance premium, employers, including small employers, should contact their health insurance agents or brokers to determine whether the employers should renew their coverage early, in late 2013, as opposed to waiting until their 2014 policy anniversary dates.  Employers renewing in late 2013 probably will pay a premium that is higher than they currently are paying, in part because of increasing medical costs, and in part because of the fees discussed above.  However, renewing early may allow employers to temporarily avoid some of the increased costs.

Early renewal will not be appropriate for every employer group.  For example, employers with a significant number of older employees, or with less-healthy employees, may not see as large of an impact.  Therefore, employers should contact their health insurance agent or broker to see if this is a solution that fits their particular needs.  Because this is such a complicated and evolving area, employers should carefully, and independently, review the advice given to make sure that it is consistent with their specific circumstances.