The Effects of Age Rating Band Changes Under Health Care Reform

The Affordable Care Act (ACA) includes provisions that prohibit discrimination by health plans against people with pre-existing conditions and provide certain protections for consumers. Effective for plan years beginning on or after Jan. 1, 2014, ACA extends guaranteed issue protections for individuals and employers, prohibits the use of health and other factors to set premium rates, limits age rating and prohibits insurers from dividing up insurance pools.

On Feb. 22, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule regarding ACA’s health insurance market reforms and existing rate review program. These reforms apply to health insurance issuers offering non-grandfathered coverage both inside and outside of ACA’s health insurance exchanges (Exchanges).

Fair Health Insurance Premiums

ACA and the final rule limit the factors that can vary premium rates in small group and individual markets for non-grandfathered plans. Specifically, health insurance issuers will only be allowed to vary premiums based on:

  • Age (within a 3:1 ratio for adults);
  • Tobacco use (within a 1.5:1 ratio, subject to wellness program requirements in the small group market);
  • Family size; and
  • Geography.

All other rating factors are prohibited. This means that several factors frequently used to set premiums, such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry, can no longer be used.

These limitations represent minimum federal standards for fair health insurance premiums. States can choose to enact stronger consumer restrictions. In addition, starting in 2017, states have the option of allowing large employers to purchase coverage through the Exchanges. For states that choose this option, these rating rules would also apply to all large group health insurance coverage.

Naturally, older patients tend to utilize health care more than younger patients. Currently the 5:1 age rate band, which is effective in 42 states, spreads the premium costs over 5 ranges of age groups. An older individual will pay no more than five times what a younger individual pays in premium, as set by the limits. On January 1, 2014, those premium costs will change overnight for both groups, with the younger patients’ premiums going up as much as 50% and the older patients’ premiums dropping up to 10%. While this is great news for some, it will likely drive premium rates even higher overall. If the younger population experiences an increase in premium that is unaffordable, they may choose not to purchase coverage or possibly drop current coverage. As the young patients drop off and leave only older patients who utilize health care more frequently, premiums will increase for everyone.

Age rating band changes, combined with limitations on other rating factors such as gender, health status and loss of SIC code discounts will increase your group coverage costs in 2014. Additionally, there are several fees which will become effective in January: exchange fees, insurance assessment fees, health insurance industry fees and the Patient-Centered Outcomes Research Institute Fee. While insurance companies are responsible for some of these fees, much of the cost will likely be shifted employers and in turn, employees.

Some industry experts expect fully insured health plans to experience minimum increases of 30% on 2014 renewals. As HHS releases new information almost daily, MedCon Benefit Systems Group, Inc. is assisting clients in plan design strategy and preparation to meet compliance rules. If you are unsure where you stand in the world of health care reform, MedCon is here to help.

Sources: Department of Health and Human Services and Insurance Network America

*The information discussed on this page is not intended to be exhaustive nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.


Legislative Brief: HSA Limits Will Increase for 2013

The Internal Revenue Service (IRS) issued Revenue Procedure 2012-26, which increases limits for health savings accounts (HSAs) effective for calendar year 2013. The following HSA limits will increase for 2013.

  • Annual contribution limits for single and family coverage;
  • Maximum out-of-pocket expense limits for coverage under a high deductible health plan (HDHP); and
  • Minimum deductibles for HDHPs.

HSA Contribution Limits

For 2013, the annual HSA contribution limit for an individual with self-only coverage under an HDHP is $3,250 (up from $3,100 for 2012).

For 2013, the annual HSA contribution limit for an individual with family coverage under an HDHP is $6,450 (up from $6,250 for 2012).

HDHP Out-of-Pocket Expense Limits

The maximum out-of-pocket expense (deductibles, co-payments and other amounts, but not premiums) limit for self-only HDHP coverage for 2013 is $6,250, which is up from $6,050 for 2012.

For family HDHP coverage, the maximum out-of-pocket expense limit for 2013 is $12,500, which is up from $12,100 for 2012.

HDHP Deductible Limits

For 2013, the deductibles under an HDHP must be at least $1,250 for self-only coverage (up from $1,200 for 2011 and 2012) and $2,500 for family coverage (up from $2,400 for 2011 and 2012).

**This MedCon Benefit Systems, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2012 Zywave, Inc. All rights reserved.

Maximize Your FSA Before 2012

As the year end approaches, we want to offer some suggestions to you about how to effectively utilize the funds still remaining in your flexible spending account, or FSA. Unlike a health savings account, the funds in your FSA cannot be carried over to the next plan year, so it is best to use them before your current plan year expires.

1. There is a substantial list of eligible expenses that can be purchased with your FSA, or that could potentially qualify for reimbursement if you have already purchased these items. Please note, this is a sample of common items and is not a complete list. Please check with your FSA provider first for a complete list of eligible expenses.

  • Acne Treatment Proactive, Stidrex, Clean & Clear Eligible
  • Acupuncture
  • Ambulance
  • Bandages Elastic, Gauze Pads, Band Aids
  • Birth Control Pills
  • Birthing Classes
  • Blood Pressure Monitoring Devices
  • Carpal Tunnel Wrist Supports
  • Chiropractors
  • Co-Insurance Amounts
  • Contact Lenses, Materials & Equipment
  • Contraceptives
  • Co-Payments
  • Crowns, Dental
  • Crutches
  • Deductibles
  • Dental Care Toothache Relief, Temporary Filling, Denture Adhesives
  • Diabetic Supplies
  • Ear Care, Ear Drops, Ear Wax Removal
  • Egg Donor Fees
  • Eye Examinations
  • Fertility Treatments
  • Adhesive Pads, Band-Aids
  • First Aid Kits
  • Flu Shots
  • Gambling Problem Treatment
  • Genetic Testing
  • Guide Dog: Other Aid Animals
  • Hearing Aids & Its Batteries
  • Immunizations
  • Infertility Treatments
  • Insulin
  • Laser Eye Surgery LASIK
  • Medical Alert Bracelet or Necklace
  • Medical Records Charges
  • Mileage for Medical Appointment Expenses for Transportation Primarily for & Essential to Medical Care
  • Nasal Strips or Sprays
  • Nicotine Gum or Patches Nicoderm, Nicorrett Eligible
  • Occlusal Guards to Prevent Teeth Grinding
  • Oxygen
  • Sleep Aids Tylenol PM, Sominex, Unisom
  • Smoking Cessation Medications Patches, Gums
  • Stomach/Digestive Relief Pepto-Bismol, Imodium, Colace, Lactaid
  • Tooth & Mouth Pain Relief Oragel, Anbesol
  • Vitamins
  • Walkers
  • Wheelchair
  • X-ray Fees

2. If you have any receipts for health care related expenses or dependent care related expenses, be sure to submit them as soon as possible in order to be reimbursed. This will help you verify how much you have left in you FSA account.

3. If you regularly purchase medical supplies that are eligible to purchase with your FSA, you can stock up on them before your plan year expires with your leftover funds.

4. Make sure you and your family members are caught up on all doctor appointments. Your FSA funds can often be used toward your co-pay and coinsurance at your physician, dentist and optometrist, as well as some specialty doctors as long as they are listed on your eligible expenses list.

5. Make sure you and your family members are up to date on your vaccinations, including the flu shot.

6. As always, keeping up with your wellness is an essential step to keeping your medical expenses to a minimum. Weight loss counseling and methods to help you quit smoking are eligible expenses for your FSA, as long as you have a doctor’s note of medical necessity.

If you have questions about any of these items, please feel free to contact your health care experts at MedCon Benefit Systems Group, Inc. (214)739-5215.