Source: United Benefit Advisors, LLC

There was a nearly 322% increase in the number of plans utilizing an early renewal strategy on December 1, 2013, which delayed many effects of PPACA until December 1, 2014. Of the employers who postponed their renewal date, 94% were small businesses that employ fewer than 100 employees.

These early renewal strategies did keep rates in check, and rate increases were delayed even further in states, such as Nebraska, Michigan, North Carolina, and Florida, that allowed “grandmothering.” Grandmothering refers to existing plans that do not meet the 2014 PPACA requirements, but which have been allowed by the federal government and state insurance department to be renewed through October 1, 2016. Some states that did not permit grandmothering include Virginia and California.

Even though grandmothering was permitted at the federal level, each state had the ultimate power to determine whether or not it would allow the extension. Adding yet another layer of complexity, carriers were not required to allow this extension. In other words, even though the states may have permitted grandmothering, some carriers required employers to transition to PPACA-compliant plans. The grandmothering extension is permitted for policy years beginning on or before October 1, 2016. Expect to see further delays into 2017.

Future rate trends remain unknown due to renewal delays and grandmothering, but an early indicator of rate trends can be seen in states that did not permit grandmothering and among large employers who moved to PPACA plans. These employers are coping with record renewal price increases. Based on current renewal rates coming in from carriers, in the states that did not allow renewal of pre-PPACA plans, many small employers are facing rate increases of 30% to 160%. In the category of employers with 50 or fewer employees, the results are staggering: in 2012, there were 507 employers with a December 1 renewal date; in 2013, that number escalated 412.4% to 2,598 employers. These changes will have a ripple effect for years to come in the small group market.