California health
insurance
Group
health insurance in California
RAF or Risk Adjustment Factor
Maximize Savings With California Small Group RAF's
(Risk
Adjustment Factor)
Group health rates can go up or down 10% based on group health until Jan 1st 2014
Most carriers offer RAF guarantees for many newly enrolling groups
(detail below)
Shopping Group health with RAF in mind can reduce annual
premium 10-20% (detail below)
Health Reform will affect California RAF Jan 1st 2014 (detail below) |
What is the Risk Adjustment Factor?
 Each carrier has to "publish" their standard
California Small Group health plan rates with the Department of Insurance or
Department of Managed Care. By law, they are allowed to increase or decrease a
given companies' medical plan rates by 10% from this standard rate based
primarily on the health of the group. This is to protect a company from
increasing a certain small group's health plan rates by an exorbitant rate (say
40% or 100%) based on the health of the group. Other state's health plans are
not governed by this law and they can increase the rates by such high
percentages based on the group's health.
When is the Risk Adjustment Factor applied or changed?
The RAF is initially set when the company is approved for
Small Group health insurance with the carrier. The company will receive
notification of their specific factor. This rate can be changes or updated at
renewal (12 months following original effective date) each year based on the
claims of the prior year. Some carriers such as
Blue Shield of California and
Health Net automatically apply the extra 10% for smaller groups (typically
less than 5 employees). Other health insurance carriers such as
Anthem Blue Cross will actually look at the health of the group even for
companies with as little as 2 people. The RAF will be re-evaluated each renewal
period.
What does the RAF look like?
It will look like 1.0 (standard rate), 1.1 (extra 10%
above standard rate); .90 (10% discount off the standard rate). Some carriers
will only have one of the three above ratings while others such as
Anthem Blue Cross allow for more flexibility such as 1.05 or .94. When you
request a
California Small Group health quote, you will see the RAF on the quote. If
you have information regarding the health of the group or wish to err
conservatively, we can request the 1.1 rating. We recommend this so that their
no surprises when the underwriting process is complete. This is especially true
if the employees are picking their own plan such as with
Anthem Blue Cross's Employee Elect. They are making a decision based on
their out of pocket expense so it is important not to have 10% increase after
the fact.
RAF Guarantees and Group size
On average, the larger the group, the better an RAF your
California small company will receive. Essentially, they are able to
"average" a few employee's bad health among a larger pool of people. In fact,
most carriers will start to offer guaranteed RAF's of 1.0; .95; or .90 for
certain number of employees. These guaranteed RAF's usually start at 10
employees. A new company usually locks in a current rate for 12 months as well
even if their is rate increase in the interim. We can let you know
of current rate guaranteed available on the market based on
your group size when you run your California group health
quote.
Health Reform and California Group RAF
The RAF in California will largely go away
Jan 1st 2014 with the new
Health Exchange plans. The
carriers will not be allowed to "tier" rates as of that
date. We expect all carriers rates will go up as a
result but the effect will hopefully be around 10% as a
result. Obviously, larger groups (say 8-50) will bear
the brunt of this since they're more likely to received the
discounted RAF currently.
Other Useful Resources for California Small Group health insurance
California small group instant quote
How to choose a Group health plan in
California
Guide to Understanding group health coverage
Why purchase a health plan for your California company
More information on company medical insurance
RAF ending
for California group health plans
|
