Small Group Employers Composite Rating

        Composite Rating for Small Group Employers


Long used in group plan health coverage, the Affordable Care Act (ACA) changed how issuers determine a composite rating for their health insurance plans. Under the ACA, some fully insured group health plans will be required to comply with many of the same nondiscrimination rules that previously applied only to self-funded plans. (Note: These rules aren’t currently effective for fully insured plans—they’ve been delayed indefinitely, pending the issuance of regulations.)

Effective for 2014, the ACA also reforms the rating practices of health insurance issuers in the individual and small group markets by limiting the factors that can affect premium rates. These rating restrictions do not apply to grandfathered plans, large group plans or self-funded plans.

In addition, the ACA currently defines a small group market plan, or small employer, as those that employ, on average, up to 100 workers. However, beginning in 2016, states can change this definition to one that employs no more than 50 workers, on average.

Composite rating is the practice of lumping all eligible employees together and assigning a single rating, regardless of individual factors (such as age, gender or tobacco use) that may make somebody a higher or lower insurance risk. The composite premium is calculated by dividing the total group premium by the number of enrollees to arrive at an average enrollee premium amount.