Premium Pain for ‘Grandmothered’ Health Plans

If you work at a business with 50 or fewer employees, watch out for grandma this year.

By that, we mean if the company has a “grandmothered” health plan, you may be in for some changes in 2016.

Grandmothered is the term insurance agents and brokers have been using for pre-Obamacare policies that were allowed to continue in 2014 and this year even though they often do not meet the Affordable Care Act’s coverage requirements.

That federal law allowed companies with 50 or fewer workers to extend their old health plans into 2014 by conducting early renewals in late 2013. A year later, Gov. Jerry Brown signed a bill that allowed these plans to continue in 2015, dubbed the grandmother year.

Now, companies that maintained their 2013 plans for two years must shift to policies that meet the act’s coverage standards. In some cases, it means adopting plans with more comprehensive benefits.

Craig Gussin, a San Diego insurance agent, said the grandmothering situation has been keeping him busy.

“We’re seeing companies get letters from the (insurance) carriers with rates for 2016 that are, in some cases, 30 percent to 100 percent higher,” Gussin said. “This year, I am having to see literally every small-group client and talk to them about their options.”

Major rate hikes are not the scenario for the entire health insurance industry in California, although every plan seems to be headed for an increase. Average increases for 150 small-group and individual plans filed with state regulators and listed online by the U.S. Department of Health and Human Services include a 21 percent increase for some Blue Shield plans.

The few instances of falling rates include a 28 percent decrease for a plan offered by Health Net.

While grandmothering is definitely an issue for certain companies, the main driver of premium increases for next year is an upward pricing trend in the overall health insurance industry, said Cheryl Fish-Parcham, director of the private insurance program for Families USA, a nonprofit consumer advocacy organization based in Washington, D.C.

“Long term, we have seen this steady march of rate increases, and that seems to be the case again this year,” Fish-Parcham said.

A recent survey by the Kaiser Family Foundation found that from 2005 to this year, premiums have increased by an average of 61 percent. While companies are still paying the vast majority of the insurance bill, workers’ premiums have soared more quickly — by 83 percent, from an average of about $2,700 per year to nearly $5,000 during the same decade-long span.

This year, companies in San Diego County appear to be moving toward health maintenance organizations and away from preferred provider organizations, often called PPOs, as a way of coping with premium increases.

Gussin said many of his clients were in PPO plans because those offer more service choices, “but I just can’t give them that level of choice at the price they are willing to pay,” Gussin said.

While the PPO option may be waning, it is still possible for companies to give their employees a relatively wide range of selections.

The Orange County-based California Choice, the state’s only privately run health insurance exchange focused on small businesses, offers a range of plans from eight insurance carriers. Through its website, the exchange allows each employee from any participating company to choose the coverage he or she wants. Traditionally, an entire organization has to choose one carrier for all of its workers.

Ron Goldstein, chief executive of the exchange, said he has recently seen a big spike in activity.

“This time last year, we had approximately 9,800 clients. This year, we have 13,500,” he said.

The exchange, now in its 20th year, largely offers HMO plans tied to specific networks of doctors, hospitals and other providers. Gussin said while employees lock themselves into one network or another each year, there are enough plans in California Choice for them to find the provider network they prefer.

“They’ve got Kaiser. You can get Sharp, Scripps … all of the major players in the San Diego market,” Gussin said.

(Covered California, the state’s health exchange, also sells small-business policies.)

In some cases, Goldstein said, employees will actually pay somewhat lower monthly premiums when moving from their grandmothered plan to one that meets Obamacare prerequisites.

This is because most workers going through the switch tend to choose coverage rated at the silver level, which pays for about 70 percent of their medical expenses. Their previous plans had offered gold-level benefits with higher premiums but somewhat lower copays and deductibles.

“Many of them are saying, ‘You know, I don’t really need that $15 copay. I am fine with a $20 or $25 copay and a somewhat higher deductible” in exchange for a reduced monthly premium, Goldstein said.

There is one area where rates are sure to increase for 2016, Goldstein said. For the first time, he said, health insurance companies are treating grown children still on their parents’ insurance plans as a discrete group.

“Because of this change, if you’re covering your kids in college, your rates are going to go up significantly,” Goldstein said.

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