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TAHU is Texas' only benefits professional association. In a time of significant change making the wrong decision on your health insurance could be very costly. A wrong decision could cost an employer tens of thousands of dollars or even their business. Now more than ever it is vitally important to ensure that you are working with a benefit professional that not only understands the laws but also understands the strategies needed to help an employer capitalize on the change. TAHU members receive the latest and best information and strategies on healthcare reform to help their clients make the right decisions.

In these changing times you cannot leave these decisions to chance. Make sure that you are working with a true benefits professional, a TAHU member.

Mark Bellman, RHU, SGS
TAHU President 2013-2014

An Important Message From The TAHU Legislative Council

Dear Members -

On Oct. 28, TAHU sent a formal recommendation to the TDI Commissioner Julia Rathgeber on the subject of composite premium methodologies. TAHU is pleased to report that subsequently, on Nov. 6, 2014, Commissioner Rathgeber sent a request for a waiver on composite premium methodology to the Centers for Medicare and Medicaid Services (CMS). The letter requests that CMS allow Texas insurers to use either the prescribed Two-Tier Federal Composite Methodology for computing health insurance premiums or the alternative Four-Tier Composite Methodology. The TDI is requesting this waiver so both options are available, consistent with TAHU’s request. Below is an excerpt from the announcement from the TDI.

“Prior to the passage of the Affordable Care Act (ACA), health insurance carriers could take into account a wide array of factors in deciding both who they wanted to sell coverage to and the rate they wanted to charge those who purchased their coverage. The ACA created guarantee issue, removing the insurers' ability to deny coverage to anyone, and limited the factors carriers can use when setting their rates and premiums. Carriers can, however, continue to factor in a person's age, area, and smoking status when setting health insurance plan rates and premiums.

The ACA also sets forth the methodology carriers must use when billing premiums to employers, who purchase health insurance for their employees via a small group carrier.The ACA requires that small group carriers, both in and out of the exchange, bill on a per-member basis.In 2015, in addition to the per-member basis, carriers may charge premiums on a composite basis. Under a composite premium methodology, carriers combine, or average, the age-specific, per-member premiums into groups known as tiers.

The U.S. Department of Health and Human Services (HHS) [the regulatory agency that oversees CMS] has specified a default methodology that will apply unless a state proposes an alternative methodology.

The HHS default methodology uses two tiers:(1) individuals age 21 and older; and (2) individuals under age 21.The composite premium for each tier is computed by averaging the per-member premiums for each business seeking coverage for its employees. Several states, approximately 13, have received HHS approval to use an alternative methodology consisting of four tiers: (1) employee only, (2) employee and spouse, (3) employee and children (no spouse), and (4) whole family (spouse and children).

Over the last several months, TDI has been researching what would be best for Texas businesses and consumers. TDI has spoken to several stakeholders groups, including carriers, the Texas Association of Health Underwriters, the Texas Association of Business, the National Federation of Independent Businesses, and several legislative offices. As a result of our conversations with agents, carriers, and other stakeholders, TDI has proposed offering carriers a choice of two composite methodologies:the default two-tier federal composite methodology, and the alternative four-tier composite methodology.

The four-tier methodology would be consistent with practices that are common in the large group market. By allowing a similar approach in the small group market, Texas would have more consistent rating across the entire group market. However, by allowing the two-tier methodology as well, carriers who prefer that methodology would be allowed to use it. TDI believes Texas’ request gives carriers, employers, and consumers the most options.”

The TAHU Legislative Council will continue to monitor and report on this situation as it continues to develop.

Email us at should you have further questions.
Jessica Watts
TAHU Director of Legislative Affairs
TAHU Legislative Council


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