Caravus' 2014 Pricing Study
Recently, it has been very trendy for the media to release projections on the pricing impacts of the Affordable Care Act. Some studies focus on the health care exchange marketplace while others isolate the small or large group markets. The underlying theme on all is a heavy political undertone aimed at either validating or criticizing the legislation as a whole.
The contradicting data is awfully confusing. After cutting through the political bias, it is realized that the legislation affects different segments of different markets in different regions, differently… yes, that is a scientific analysis. The paramount concern of most is how it matters to “me”. Caravus recently embarked on a study aimed at answering that very question for its clients categorized as small (2-50 employees) by the legislation. The small employer market is poised for significant volatility in 2014 as pricing compression led by new underwriting limitations moves us closer towards community rating.
We recently worked with our two largest medical carriers to analyze the 2014 pricing impact on 174 small employer plans based in the greater St. Louis region. On average, a small employer group plan should expect a 28% premium rate increase on a similar plan design as compared to what is being paid today.
The numbers are quite staggering as 36% of small employers should brace for at least a 35% pricing increase in 2014 and 50% of small employers should expect at least a 20% increase as a result of the new regulatory requirements.
What can clients do to delay the pricing volatility? Caravus continues to work with clients on a daily basis to find their ideal strategy, such as early plan renewals effective for December 2013. But small employers realize they’re only delaying the inevitable. Planning today is crucial as employers learn to adapt to their “new normal” and face health care reform head-on.