Big Changes for Small Group Health Insurance in Oregon

By: Michele McCall

What is the Oregon Small Group Reform (HB 2002) and how will it impact your employee group health plan?

House Bill 2002 passed during the 2007 Oregon Legislative Session. This bill was designed to combine the small employer group market into a single pool for medical insurance rating. The bill changes the definition of a small employer group from employer groups with 2-25 employees to employer groups with 2-50 employees. This makes the state and federal small group definitions more consistent. Proponents of this change also believe that the increased small employer group size will lead to a healthier pool and a more stable health insurance market. The new legislation went into effect on April 1st. There is a three year phase in period for the market to come into compliance. During this time the rules are in a temporary phase and they are subject to change. However, there are several important changes that are being implemented on policies with April 1st effective dates. Some of these changes will be apparent at your next renewal or the next time you review the market for coverage.

The first major change is that HB 2002 expands some of the regulations that previously only applied to the 2-25 market into the 2-50 market. Employers who are currently covered in the 26-50 market will need to examine their eligibility policies at renewal to determine if they are still in compliance with the HB 2002 legislation. HB 2002 implements the following eligibility requirements:

• Employee waiting (probationary) period cannot exceed 90 days
• All classes/categories of employees must have the same hours worked and probationary periods

Second, the state has expanded the group characteristics that carriers are allowed to base rates on. The expanded ratable characteristics will require that your agent submit additional information when requesting quotes for renewal or new coverage. HB 2002 allows carriers to rate on the following:

1. Spouse and child ages
2. Employee and dependent premium contributions
3. Employee participation
4. Employee and dependent tobacco use
5. Wellness and health promotion programs offered through the worksite
6. History with the same/multiple carriers
7. Claims experience

At this time the market is divided on which of the new characteristics they will be rating on. Some of the carriers are using dependent ages and tobacco use. While most of the carriers are set up so that they can produce rates without this information they may still base final rates on this data which will be collected on the enrollment applications. You will need to provide your agent an employee census that includes dependent ages and tobacco usage if you want to get the most accurate rates from all carriers.

The final immediate and noticeable change from this legislation is the state requirement that all groups applying for health insurance must complete an Oregon Standardized Group Profile Form. This form will be used by carriers to determine whether the group should be rated as an Oregon Small Employer or in the large group pool. This form must also be submitted prior to renewing a policy. The Group Profile Form asks for the number of total employees and the number of eligible employees. It is important to understand the distinction between these two categories. The number of total employees should be everyone on payroll including part-time, seasonal and temporary employees. The number of eligible employees only counts employees who worked a regular schedule of 17.5 hour or more per week during the preceding calendar year. Note: eligible employees does not mean that they are eligible for the group health plan. The employer can still set the number of hours per week that an employee needs to work to be eligible for the plan anywhere between 17.5 and 40 hours per week.

The new legislation will require extra work for employers when it comes time to prepare the annual employee census for group health marketing. It is important that the employer put in the time up front to gather the additional information so that the agent can obtain the most accurate quotes possible. The carriers are predicting that there could be substantial rate changes if the quotes are prepared without including data for the new rating characteristics. Employers can minimize the risk of having a big discrepancy between quoted rates and sold rates by providing a complete and accurate census at the start of the quoting process.

If you have any questions, please call our Employee Benefits Department.