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Life Health > Health Insurance > Health Insurance

Broker sees age-band train wreck

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Starting a group health plan that complies with the federal law could infuriate veteran workers.

Alan Schulman, a Rockville, Md., benefits broker, told members of the House Small Business workforce subcommittee about the problem Thursday at a hearing on Patient Protection and Affordable Care Act implementation.

Schulman spoke at the hearing on behalf of the National Association of Health Underwriters.

PPACA prohibits carriers from using most forms of personal health information when setting small-group rates, but it does let them charge the oldest workers three times as much as they do the youngest ones.

In the past, carriers also used employee age when they set small group health rates, but they offered the groups “composite rates” calculated in such a way that the premium for younger workers was the same as the premium for the older workers, Schulman testified, according to a written version of his testimony.

Now, because of the way the U.S. Department of Health and Human Services has written the PPACA “age band” regulations,”it’s virtually impossible for an issuer to give an employer a composite rate,” Schulman said.

“Instead, each employee gets an individual rate that varies based on their personal age,” Schulman said.

About 80 percent of Schulman’s own small-group clients avoided having to comply with PPACA immediately by changing plan year start dates.

But, at one client employer with about 20 employees, the old composite rate for single coverage was about $310 per month.

The new single coverage monthly rates vary from $325 for the youngest employee to more than $900 for the oldest.

“The idea of explaining to the older employees on the plan just how much more they will have to pay is unsettling,” Schulman said.

Schulman ultimately came up with a level funding strategy to help the employer avoid having to tell the oldest employee that the monthly premium would be $900 per month, but he said that feature could trip up other small employers when the start of their next plan year comes around.

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