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The ACA also allows (but does not require) states to include tobacco as an allowable rating factor. OHIC does not recommend implementing such a factor, and as such has not included this in H7892.
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A technical amendment will be needed to accomplish the intent of this portion of the legislation. Massachusetts merged the individual and small group markets as part of their reform efforts. Specifically, they merged both rates and products (with the exception of the young adult plan). MA small group rates are subject to 2:1 compression, and allow the following rate adjustment factors: age, industry, rate basis type, group size, geography, wellness program usage and tobacco usage.
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Whether a transition process should be designed to mitigate any significant rate impacts at the individual policyholder or small employer level. Whether any administrative cost components should remain separate, such as broker fees allocated to small group policies. Whether rates in a merged market should vary based on the different administrative costs of individuals and small groups. Whether rates in a merged market should vary based on reinsurance revenue available to individual policyholders. If rates are allowed to vary, how should such variations apply to sole proprietors in the current small group market. For Rhode Island, the primary considerations driving this recommendation are: o Increased Choice for Individuals: BCBSRI is the only carrier offering coverage in the individual market; whereas in the small group market, coverage is offered by BCBSRI, United, and Tufts. Combining the markets would therefore likely offer additional choice of carriers for Rhode Islanders without access to affordable employer-based coverage. o Stability of Rating Pool: We estimate that, post 2014, there will be a sizeable increase in the individual market increasing from 14,000 to ~ 69,000 individuals seeking coverage without access to employer-based coverage.4 Absent a market merger, this sizeable swing in enrollment could result in significant rate volatility.5 Combining the individual market segment with the ~85,000 covered lives in the small group market should serve to stabilize the individual market, minimizing annual rate fluctuations due to changes in participation rates, enrollee characteristics. o Consistency: Post 2014, with the advent of the Exchange and the availability of individual tax credits, individuals will be encouraged to shop amongst their health insurance options. Combining the pools would ensure consistency of options for individuals and small groups particularly among groups of one -- thereby limiting the opportunity for adverse selection between the two pools. Impact on Rates: Analysis performed by actuaries with the States contractor, Wakely, suggests different rate impacts depending upon the assumptions used to analyze a merged market. Using some assumptions, individuals would see an overall, average 40% (Pool 1) or 8% (Pool 2) decrease in rates in a merged market in 2014, and small employers would see an overall, average 2% decrease in rates in a merged market in 2014. Using other assumptions, in 2014 individual rates would decrease by 41% or 10%, pending
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Who Goes Where Under Federal Healthcare Reform: RI Population Insurance Status Projections, 2014 & Beyond, OHIC, Oct 24, 2011. 5 The ACA anticipated this volatility and includes some protective measures risk adjustment and reinsurance . Merging the market would provide an added protection.
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upon the pool, and small group rates would remain unchanged. Further discussions with RI health insurance carriers are needed to develop the set of assumptions for a merged market that is in the best interests of Rhode Island.
Individuals under age 30, or who are exempt from the individual mandate because of hardship or lack of affordable coverage may enroll in catastrophic plans. Catastrophic plans are allowed to be less than the 60% Bronze actuarial value requirement, although they must provide essential health benefits.
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