ATLANTA—The Affordable Care Act has sent a number of small credit unions scrambling to find affordable employee healthcare coverage.
Industry insiders report that some small credit unions are moving quickly now to find new coverage to replace plans that do not comply with Affordable Care Act (ACA) requirements, predicting this signals a slowdown, or possibly the end, of generous healthcare plans for many credit unions with less than 50 employees.
News outlets reported last week, and healthcare analysts confirmed the stories, that the ACA has health insurers sending cancellation notices to many individual and small group subscribers (those with less than 50 employees) across the U.S., stating their plans do not meet the standards under the new rules, and will end once plans renew in 2014.
The insurance carriers are offering new coverage that complies with the ACA, but often at a higher price or with reduced benefits, analysts explained.
"Due to the requirements of the new law surrounding the type of coverage that is required to be in all policies effective Jan. 1, 2014, many plans in the individual and small group markets will need to be replaced," said Annette Bechtold, SVP of regulatory affairs and reform initiatives for Digital Insurance, a health benefits advisory firm.
Bechtold said the notifications caught many Americans by surprise. "The problem is that President Obama and the Departments of Health and Human Services told the public they could keep their health plans if they liked them. What they should have said is they could keep their health plans if they liked them until 2014, when the law would dictate more uniform coverage for all."
Initially, the Obama administration stated that policies in effect as of March 23, 2010, could be grandfathered or kept even if they don't meet the requirements of the new rules. But the Department of Health and Human Services scripted regulations that altered the government's stance, narrowing the provision, stating that if any part of a policy had substantially changed since March 23, 2010, it would not be grandfathered in.
'Don't Know What We're Going To Do'
"I don't know what we're going to do," said Greg Olmsted, CEO of North Alabama Educators CU in Huntsville, Ala., who acknowledged the cancellation notice that his CU received arrived in October caught the credit union off guard. "We are looking at every possible option now before our renewal date Jan. 1."
But health insurance plans, especially for small groups, Olmstead said, have a price tag much higher than the $83 million credit union has become accustomed to paying. He is currently assessing the new plans offered from his carrier. "The closet option our Blue Cross and Blue Shield provider put together, based on the new qualified plans, comes with a 42% increase in monthly premiums, which we can't pay."
Olmstead said the new uniform tiered-plan pricing dictated by the ACA-Platinum, Gold, Silver and Bronze-may steer the 22-employee CU to almost the least-expensive option. Olmstead explained the 42% hike came from a Platinum plan, which matched up the best with the CU's existing coverage.
"We looked at Gold, but that is a 19.2% increase. If we are forced to go with Silver it will be a shock to our employees because we had an excellent plan, and we paid for 100% of the coverage."
Impact On Employees' Bottom Lines
Olmstead is concerned about the impact to employees' bottom lines from the change, stating that the Silver plan's coverage comes with a $2,000 deductible before any co-pays kick in. He compared that with employees having only a $100 deductible for a maternity stay with their existing plan.
Bechtold explained that employers can delay the decision to find new coverage for about a year if their carrier allows them to move up their current plan's renewal date to this year. She said many health insurers are providing this option, setting the renewal date for Dec. 1, 2013.
But Bechtold said credit unions have to decide whether to take on these new plans and rates designed under ACA guidelines or accept what's behind "door number two-the carrier's offer of renewing early. Those offers could come with increases or changes to coverage."
Cindy Atteberry, CEO of the $25 million Joplin Metro CU, said her institution renewed early.
"We renew each year in January, but our carrier came to us in the summer and said if we renew in July there would not be a price increase," said Atteberry, who explained that at the time the credit union made the move she was unaware of the impact the ACA could have on existing plans. "With what I know now, and when you get something that seems too good to be true, I am concerned."
Atteberry said after checking with her insurer, her new plan conforms with the ACA requirements. Even so, conversations with local CU leaders have the CEO thinking that next year rates could climb significantly.
"We are prepared for the worst," she said. "We now cover 100% of our employees' healthcare costs, but I know we will have to take a serious look at this next year before renewal. I don't see how we, or other small credit unions, can continue to offer the same plans."
Bechtold said that employers with a young staff may face the largest increases. That's because Obamacare relies on young subscribers to subsidize older, more costly policyholders. David Martin, managing principal, credit union services, Digital Benefit Advisors, Scottsdale, Ariz., added that small employers face the biggest premium hikes.
"With most carriers, employers in the two- to 50-space are community rated, so they are seeing more drastic changes than employers in the 50-and-above space," he said.
Great Deal Of Discussion
Jim Fournier, compliance officer at the Salus Group, a health benefits advisory firm in Sterling Heights, Mich., said the new healthcare rules are generating a great deal of discussion and angst among credit union execs now. He said there is growing discussion about dropping healthcare coverage and sending employees to health insurance exchanges.
"We are hearing credit unions talk about this option. But we have not had anyone tell us they have decided to make the move," said Fournier, who cautioned the decision makes it more difficult for the CU to hire and retain top talent. "Several CUs, we know, have discontinued their group retiree health coverage and have provided a payout to individuals to purchase their own coverage."
Some believe the cancellation notices may be isolated to small credit unions whose healthcare benefits advisors did not pay attention to the new rules and failed to partner with carriers to ensure the CU's coverage meets ACA requirements-and, if needed, did not facilitate early conversion to a conforming plan.
Gregg Stockdale, CEO of the $35 million 1st Valley CU in San Bernardino, Calif., said his CU's plan that renews Jan. 1, meets ACA requirements. "I have been told our plan is fine under the new rules. It would be shocking to me that a lot of small credit unions are receiving cancellation notices, but under Obamacare, who knows."
North Alabama Educators' Olmstead understands what faces his CU, saying it's a difficult time now as his shop combs through as many options as it can find to provide staff with coverage the credit union can afford.
"We used to have a Cadillac plan, but now these new Cadillac plans cost just about as much as the Caddy itself."
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