CMS Approves Composite Rating Option for Small Group Market in Oklahoma

The Centers for Medicare and Medicaid Services (CMS) has approved optional composite rating for small group market plans in Oklahoma for 2016 according to a news bulletin issued by the Oklahoma Department of Insurance. The determination allows insurers in the small group market to utilize composite premium rating rather than per member premium rating provided insurers make such premium development methodology available to each small group employer in the market. The allowance for such rating was urged by members of The Oklahoma State Association of Health Underwriters (OSAHU) in a meeting with the Oklahoma Department of Insurance in April of this year. The Oklahoma Department of Insurance received approval from CMS in August. "This is a huge development for small group plans with 50 to 99 employees in that they can have one employee rate for all employees on their health plan rather than a different rate for each employee by age", said OSAHU President Wayne Pettigrew. Groups of 50 to 99 employees were to be moved to the individual rating methodology effective with their renewals occurring in 2016 had the option not been approved. The Oklahoma tiered-composite rating methodology will now be available to all small employer groups regardless of size. The option to have individual rates if the employer desires them is still allowed. Federal regulations require that the group health plan's sum of composite premiums equal the sum of per-member premiums based on final census and plan selection up to such time as the effective date of issuance or renewal of coverage. Once the insurer establishes a small group's aggregate premium, it is not subject to change during the plan year. Many agents had feared that age discrimination could have occurred if the individual rating methodology had been required which could have put groups with over 50 employees in a bind as they attempt to comply with the Affordable Care Act. "If you are an employer that is struggling to comply with the ACA and you have the option of hiring a 25 year old employee with a $250 per month health premium or a 50 year old employee with a $500 per month health premium, which one are you going to hire", asked Pettigrew. "Now the employer has the option of spreading that risk among all of his employees while maintaining easier accounting of their health plan", Pettigrew added. An American Academy of Actuaries issue brief in March 2015 raised concerns that the move to required individual rating in the small group market could have caused adverse selection and market disruption due to the new more restrictive rating rules and requirements.