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Anthem, insurance trust create Obamacare alternative

December 2, 2013

Anthem Blue Cross and Blue Shield has teamed up with the Indiana Manufacturers Association to give small manufacturers an option to side-step one of Obamacare’s new restrictions.

The Indianapolis-based health insurer will provide its broadest-network plan to manufacturers with 50 or fewer workers that join a new group insurance trust formed by IMA.

By joining the trust, IMA’s small members could avoid the community rating rules the Affordable Care Act, aka Obamacare, puts into effect Jan. 1. Those rules will raise premiums for employers with younger work forces and reduce premiums for older work forces.

Anthem estimates that, of the nearly 500 IMA members with 50 or fewer workers, two-thirds would see no increase or a decrease in their premiums by joining the trust rather than buying a new policy under the new rules in 2014.

That possibility has sparked “tremendous” interest since IMA launched the trust last month, said Jeff Goodwin, IMA executive vice president.

“We’re going to have the largest network possible, and we’re going to do that in more cost-effective manner,” Goodwin said.

Goodwin expects even more growth a year from now, because many small employers decided to renew their existing insurance policies one month early, which means they don’t have to buy an Obamacare-compliant policy until Dec. 1, 2014.

“I think that 12 months from now, things will look very different,” he said. “I think we’re going to continue to grow.”

A key question is whether more trade associations follow IMA’s example. The Indiana Bankers Association has a similar insurance trust. But in both cases, only companies with federal codes designating them as a manufacturer or a bank can join.

If more associations create insurance trusts, loads of employers could duck Obamacare’s community rating rules. That’s because trusts, by pooling workers from many small firms, act as one large employer. And large employers, because their health plans are regulated by federal, not state, law, are not subject to Obamacare’s community rating rules.

The rules forbid health insurers from charging more than three times as much for the same policy for the oldest people as for the youngest—even between 21- and 64-year olds.

The rules allow insurers to charge 1.5 times more to smokers than to non-smokers, the only health condition insurers that can factor into their premiums.

Obamacare also allows insurers to charge more in areas where the cost of doing business is higher. And, of course, it still allows insurers to charge more for family coverage than for single coverage.

But these rules are far more restrictive than before, especially in Indiana, which had no formal rating structure to limit what insurers could charge older and sicker customers.

The new community rating rules were going to sock First Person Benefit Advisors with an 81-percent premium increase, before the small Indianapolis-based company decided to renew its existing policy early instead.

Goodwin said IMA decided to create the insurance trust to help its members keep offering health benefits and give them easier access to the numerous insurance brokers Anthem uses to sell its employer policies.

He also noted that the association’s insurance trust will offer a compliance dashboard software tool to help small employers adhere to the new ACA reporting requirement, as well as health insurance rules pre-dating the law.

“They usually don’t have an HR department,” Goodwin said of IMA’s small members. “They’re usually relying on an independent broker or us or someone online. We’re helping them stay in compliance with federal and state laws.”

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