Renewals: To ACA or Not to ACA—That is the Question

Renewals are in… some are ugly, and some are not.  As expected, there are definitely groups that are going to benefit from an ACA plan.  Likewise, there are many groups that either will not immediately benefit from ACA, or simply have no interest in changing their current plan that they are used to, and will therefore grandmother.

The first renewals we received were ACA rates from UPMC.  I must confess, they weren’t all very friendly - we have two groups whose ACA renewals showed over a 100% increase.  Now granted, this was because their rates were so amazingly low to begin with, but seeing over a 100% renewal is unsettling, at best, regardless of the reason.  The good news is, when the grandmothered rates came in, they were much friendlier for those groups.  Now that is not to say that this is the case for all groups.  There are multiple groups that we are currently looking into ACA options for, because they are projected to have a cost savings.  Another point to consider is that the premium costs and the potential out of pocket costs are not always directly related.  It is possible that on the surface it appears that grandmothering is the way to go, however, if you dig deeper, the plan could show a savings in ACA.  For a real life example, let’s look at company XYZ.

XYZ has a grandmothered renewal option with a 5% increase and the ACA renewal shows a decrease of 3.5%.  In their current, non-ACA plan, they have an HRA with a $2500 deductible, in which the employee pays the first $625 and the employer foots the rest of the bill.    At first sight, the inclination for the group is that a 5% increase is marginal and if that means avoiding ACA, it just may be worth it.  However, when you look into the benefits, ACA works in the favor of the employee, as well as the employer.  For XYZ, we looked at an ACA plan with a $250 deductible and no HRA because due to the variable nature of ACA, HRAs are not widely offered by the carriers.  In this case, the employee would currently be responsible for the first $625 of deductible, but in the proposed ACA option, they would only have exposure to a $250 deductible.  That is clearly a cost savings for the employee, but what about the employer?  The premium is less, and the employer would not have the weekly unknown cost from the HRA.  Therefore, in this case, the ACA option could be beneficial for all involved.

There is no feasible way to say whether ACA or grandmothering will be best for every group - the complexity of each situation prohibits this.  However, we have prepared various scenarios based on possible costs incurred to demonstrate to our clients what the costs could look like for an employee, based on the option they choose.  This has proven to be an essential tool in comparing costs and aiding groups in choosing the best possible course of action.