Under the Radar: ACA Change Means Premium Increases for Children, Teens.

• Author: Lang, Ron
• Position: Healthcare update

Starting Jan. 1, a significant change in premium calculations is occurring that has not caught as wide attention as other disruptive Affordable Care Act (ACA) provisions have.

As background, for individual and small-group health plans, the ACA requires the U.S. Department of Health and Human Services (HHS) to determine the incremental factors used to calculate the difference in premiums between ages. Large groups are not regulated in this way and most have composite rates across all ages, rather than a rate for each specific age as mandated by the ACA for small groups and individuals. All California insurance companies must use these HHS mandated age factors, also known as age relativities.

There's a different incremental factor for each age; for example, from age 49 to 50, the factor increases 4.7 percent, while the 39 to 40 year old increases only 1.3 percent.

The new year will mark the first time that the HHS has modified the age relativities since the ACA's inception, and it's only changing the 0-20 year olds rating factors. The net affect will be to significantly increase premium rates for those in this age range, relative to the other ages.

Prior to the ACA, each insurance company determined age relatives based on their own actuarial experience. California had mandated that all children were charged the same rate and employees were age rated based on bands of ages (30-39, 60-64, for example). The ACA mandates a maximum 3:1, premium ratio between ages 21 and 64+. This caught a lot of media attention when implemented four years ago because it results in young adults (21-39) paying relatively higher premium, in essence subsidizing the older ages.

From 2014-17, the HHS had set ages 0-20 at the same relativity. The factor change between age 20 and 21 created a 57.5 percent premium increase, taking many parents by surprise, as well as younger employees already out on their own.

Beginning in 2018, the HHS is segmenting the 0-20 age band and...