Under the Affordable Care Act (ACA), a small employer is defined as one with an average of at least one but not more than 100 employees on business days during the preceding calendar year and has at least one employee on the first day of the plan year. The ACA allows only four rating factors to be used for setting premiums in the individual and small group markets – age, geography, family size and tobacco use. Under California law, only three rating factors may be used – age, geography and family size. California does not allow tobacco use rating.
For plan years beginning in 2018, the age rating for children in the individual and small group markets is changing. Previously, regulations issued by the Centers for Medicare & Medicaid Services required the use of a single age band covering children 0 to 20 years of age. The regulations have been amended for plan years beginning in 2018 to require the use of a single age band for ages 0 through 14 and one-year age bands for ages 15 through 20. The rating factors also increase for all children – from the current 0.635 factor to a range of 0.765 to 0.970 depending on the age of the child. As a result of these changes, those buying coverage in the individual and small group markets are likely to see notable premium increases for family coverage.