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X-Ell Employee Benefits, LLC |
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Guaranteed Issuance |
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NJ Small Employer (2-50) Reform Law Summary |
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To promote fair competition and
discourage carriers from cherry-picking favorable risk, the Reform laws
eliminated medical underwriting.
Health questions and history of individual employees specific to a
particular company can no longer factor into the price of a company's
insurance plan. Risk has to be calculated at the
aggregate level, meaning that the insurance company will pool all the
policies enrolled in a particular plan together and base pricing and
actuarial claims losses on the pool.
Claims experience is spread among the pool and not targeted toward any
one employer within the pool. So, if a
small business has employees who become ill or experience a catastrophic
illness, the company plan will not be effected by the losses: the pool of
insured businesses within that same plan will bear the burden of the losses
and share the cost. This feature of the legislation
presents the single largest challenge to carriers selling products in the
small group market. Without the screening mechanisms for risk in place,
competitors blindly assume risk – both good and bad – based purely on assumptions. The factuality of the risk information
provided by medical underwriting methods disappeared so that the competitive
advantages of risk shifting no longer apply. |
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1680 Route 23 North, Suite 310, Wayne, NJ 07470 |