April 07, 2015
On March 25, 2015, the Texas Department of Insurance (TDI) published several FAQs on their website informing health insurance issuers that the use of four-tier composite premiums for plan years beginning on or after Nov. 1, 2015 has been approved in the small group market on an optional basis. The method of calculation to be used in determining family composite premiums is employee, employee plus spouse, employee plus children, employee plus family, with tier factors of 1.0, 2.0, 2.0 and 3.0, respectively. The FAQs include links to several other helpful resources, including an example of how composite rating differs from per-member rating (which must continue to be provided), a link to TDI’s request to CMS for four-tiered approval and a link to the HHS Final Rule which outlines the requirements for composite rates.
As a result of this decision, composite rates may be requested by employers in Texas sponsoring small group plans effective for plan years beginning on or after Nov. 1, 2015 and carriers may optionally provide such rates in addition to the per-member rates. No other composite rating methodology is permitted (such as two-tiered rates under federal law) now that Texas has received approval to use four-tiered rates.