Earlier this year, Brian Nicklason, president of Woodlands Bank in Deer River, had lunch with his insurance broker to ask about insurance options for the coming year.
Nicklason was eager to find out if he'd be able to keep the policy he's been providing to his 26 full-time employees.
Not exactly. Nicklason's broker told him that new Affordable Care Act rules that take effect in 2014 would change the cost of his plan significantly.
However, he said Nicklason could lock-in his current employee health plan for another year if he were to renew early. That would postpone a nearly 50-percent increase in the cost of the plan until late 2014.
So, Nicklason joined the ranks of Minnesota's small group policy holders who are renewing their insurance early to avoid higher insurance rates designed to make insurance more affordable for companies with unhealthy workers.
According to the Minnesota Department of Commerce, the state has roughly 324,000 small group policy holders -- organizations with fewer than 50 employees.
No one has a precise count of how many are renewing their policies early to avoid inevitable cost increases stemming from the new federal health care law. But clearly there's demand.
Medica officials say about half of their 7,500 small group policies are renewing early in 2013. "What we were hearing was a demand from the market to allow employers to potentially change the effective date of their plans to Dec. 1," said John Naylor, senior vice president of commercial markets for Medica.
Small group policy holders can change the effective date of their health plan at any time, so moving the renewal date to Dec. 1 of this year maximizes the amount of time they can hold on to their current plan.
Clients of Blue Cross and Blue Shield of Minnesota and HealthPartners are renewing their plans this year, too.
Starting next year, the small group market will be required to operate under a practice called community rating, which will make insurance more expensive for firms that have relatively healthy workers.
So far, the federal government requires the community rating only for policies sold to individuals or families, and small group policies; large group policies aren't subject to the new rules.
But the change will upend traditional insurance pricing practices where healthier -- and cheaper -- workforces received a break on premium rates, said David Martin, president of the David Martin Benefits Consulting Group.
"The whole concept of rewarding those groups that have been performing well on claim ratio and charging more to those groups that are incurring more expenses is changing to one rate -- come one, come all," he said.
The new rule is meant to prevent a common situation where one employee's costly illness can send the business' health premiums into orbit. Businesses that have filed a lot of claims will likely get a better deal starting next year.
Among the companies that will see lower insurance payments next year as a result of the community rating system is Indigo Identityware in Minnetonka.
Don Jacobsen, CFO of Indigo Identityware, said his workers incur a lot of health care expenses, and that showed up in a 150 percent jump in the cost of the company plan last June before the Affordable Care Act took effect.
"Our experience for a small group was not good. Our utilization was high," Jacobsen said. The rate increase "was just unacceptable, we just couldn't afford it."
Jacobsen's firm found less costly insurance to cover them through 2013, but it was still 60 percent more expensive than what it had been paying.
Under the new community rating rules, Jacobsen can expect to save 5 percent to 11 percent from his current cost next year, depending on the plan he picks.
WEIGHING THE COSTS
For some, renewing coverage in 2013 comes with a higher cost than they'd been paying, said David Ackerman, a client executive with the Marsh & McLennan Agency.
"But it is not as much of an increase as they may be seeing if they renew at their ...regular time in 2014," he said.
Roger Steward, president of Northwoods Bank in Park Rapids, said the 3 percent cost increase his firm will incur to renew its policy this year is a much better deal than the expected 35 percent increase the bank would have seen if it renewed its policy on Jan 1.
Steward said he's frustrated with the new rules because they penalize his staff.
"When they take care of themselves, when they watch what they eat, when they watch their weight, when they control things that you can control, why shouldn't you get a break for that?" he asked.
When banker Brian Nicklason learned that his company's insurance plan would cost 50 percent more - or about $52,000 -- in 2014, he considered switching plans. But he couldn't find anything that offered enough savings to give up the customer service he and his employees enjoyed with their current insurer.
With 26 full-time employees, Nicklason's operation is too big to quality for tax credits available to eligible small businesses that buy through MNsure.
So Nicklason opted to renew Woodland's current policy on Dec. 1 and incur a relatively modest 5.4 percent cost increase instead.
Nicklason said that saves him money and gives him time to readjust the bank's contribution to his employer's plans.
Right now, Woodlands Bank pays 80 percent of their employee's premium costs. The plans come with a $3,000 per person and $6,000 per family deductible, but the bank covers most of those costs, too.
Nicklason wants to continue offering coverage to his employees, but community rating will force him to make some changes, whether it be limiting who can be on the employee plan or rethinking coverage options.
"Here's my fear," Nicklason said. "Under the new plan are we going to have the same level of health quality that we have now? Can I still go to the Mayo Clinic if I want? Are we going to have those options for the quality of health care for our children and our spouses and ourselves? I don't know."