Health Net Exits California's Group Health Market: What You Need to Know
Health Net's exit from California's group health market could impact your business significantly. Learn about the timelines and necessary actions to take.
#Health Net Is Leaving California's Group Health Market. Here Is What That Means for Your Business
On September 1, a critical letter was sent to employers offering medical coverage through Health Net. This isn't a routine rate increase; it's a termination notice that could significantly impact your business and your employees' health coverage.
Health Net, a subsidiary of Centene, has announced its exit from the commercial group health market in California and Oregon. This decision raises urgent questions about your next steps as an employer. In this post, we'll break down what this means for your business, the timelines you need to be aware of, and the actions you must take.
Health Net is exiting the commercial group health business in California and Oregon.
Group plan coverage ends on February 28, 2027, or earlier based on your contract.
Employers must prepare for potential double deductibles and continuity of care challenges.
Consider all options, including PEOs, for employee benefits management.
What Actually Happened
On September 1, 2026, Health Net announced it would exit the commercial group health business in California and Oregon. The company stated this move is to focus on government-sponsored healthcare.
This exit affects all small and large group medical plans, including HMO, PPO, and point of service products. Groups enrolled through CaliforniaChoice are also included. Additionally, Health Net’s dental, vision, and Employer Group Waiver Plans will be terminated, although group life policies will remain unaffected.
However, Health Net will continue to offer Medi-Cal, Medicare Advantage through Wellcare, and individual and family plans under the Ambetter name. If you or your family members are enrolled in these plans, your coverage will remain unchanged.
The Dates That Matter
Understanding the timeline is crucial in navigating this transition. Group plan coverage for Health Net ends on February 28, 2027. However, your specific termination date may vary based on your existing contract.
Key dates include:
September 1, 2026: Termination notices were mailed to employers.
February 28, 2027: Coverage for group plans officially ends.
Last effective date for new business: September 1, 2026.
Some groups may be offered a renewal before February, but remember: a renewed policy still ends on February 28, 2027. Think of it as a temporary bridge, not a long-term solution.
Why This Is a Bigger Problem Than It Looks
The implications of Health Net's exit go beyond merely choosing a new insurance provider. Here are three critical challenges you will face:
1. The Timing Challenge
February 28 falls in the middle of the plan year for most groups, right after the busy renewal season. This timing means:
Underwriting queues will be lengthy in November and December.
If you wait until January to shop for a new carrier, you'll be competing with numerous other businesses in the same situation.
2. The Deductible Problem
If your plan year follows a calendar year and you switch carriers on March 1, your employees may face two deductibles within the same year. Specifically:
Employees will have a deductible from Health Net that resets on January 1.
A new deductible will begin with the new carrier on March 1.
Some carriers may credit previously met deductibles; others may not.
It's essential to ask and get this information in writing to avoid surprises.
3. Continuity of Care Concerns
If any of your employees are currently undergoing treatment, pregnant, or scheduled for surgery, switching carriers can complicate their care. Here’s why:
Health Net authorizations will not transfer to a new carrier.
Provider networks may not align perfectly between Health Net and the new carrier.
California’s continuity of care rules can help, but effective management is crucial.
“The groups that come out of this fine are the ones that start planning in September.”
What You Need to Do
Here’s a step-by-step guide to ensure a smooth transition for your employees and your business:
Review Your Notice: Make sure to write down your termination date, renewal date, group number, and any notice requirements in your contract.
Decide on Your Move Date: Choose between January 1, 2027, and March 1, 2027, considering the potential double deductible issue.
Build a Clean Census: Gather all eligible employees and dependents' information, including home ZIP codes and coverage tiers.
Prepare Required Documentation: Collect your current invoice, benefit summaries, network names, and contribution schedules.
Identify Continuity of Care Risks: Ask employees if they have ongoing treatments or medications that need prior authorization.
Do Not Cancel Until Replacement is Bound: Confirm the new carrier’s approval and ensure all details are finalized before ending your Health Net coverage.
Handle Continuation Participants: Ensure that COBRA and Cal-COBRA participants receive the required notices on time.
Communicate with Employees Early: Inform them of the changes and provide necessary information about their options.
The Question Most Health Net Groups Have Not Asked Yet
For many small employers, Health Net served as the affordable HMO option. With its exit, the remaining carrier quotes may not offer similar value.
This is an opportune moment to reconsider your options beyond merely replacing Health Net. If you're navigating the small group market alone, you're purchasing at a disadvantage. A Professional Employer Organization (PEO) can shift this dynamic.
Through Easeworks, your employees would join our plans instead of a standalone small group policy. Benefits are managed alongside payroll, workers' compensation, and HR compliance. This can simplify your benefits management process.
Not every company will benefit from this approach, and we will provide honest assessments tailored to your needs. We’ll run side-by-side comparisons of a standard small group replacement and the PEO option, ensuring you see how each choice fits your employees' needs.
Table: Benefits Comparison — Small Group Replacement vs. PEO
Criteria | Small Group Replacement | PEO Option |
|---|---|---|
Cost | May increase due to fewer options | Competitive pricing due to pooled resources |
Administrative Burden | High, requires independent management | Low, managed alongside other HR functions |
Flexibility | Limited to available carriers | More options, tailored plans available |
Compliance Support | Minimal, relies on employer knowledge | Comprehensive, includes HR support |
Frequently Asked Questions
What should I do if my employees are on ongoing treatment?
Identify who is currently receiving treatment or has upcoming surgeries. Collect this information confidentially and provide it to your new carrier to ensure continuity of care.
Is there a specific timeline for switching carriers?
You need to act swiftly, ideally starting your search and decision-making as soon as possible, given the looming February 28, 2027 deadline.
How do I know if my new plan meets my employees' needs?
Conduct a thorough comparison of available plans, focusing on network coverage, costs, and benefits. Consider employee feedback and needs during this process.
What if my employees are not eligible for the new plan?
Employees who do not qualify for the new plan can enroll in Covered California during a special enrollment window that runs 60 days before or after losing coverage.
Can I renegotiate my contract with Health Net?
Since Health Net is exiting the market, renegotiation is unlikely. Focus on preparing for a transition to a new carrier instead.
What resources are available for managing this transition?
Consider working with a benefits consultant or a PEO like Easeworks to navigate these changes effectively and find suitable options for your employees.
Conclusion
The exit of Health Net from California's group health market is more than just a carrier change; it’s a call to action for your business. You need to navigate this transition thoughtfully, ensuring your employees' health and well-being are prioritized.
By starting early and considering all available options, you can mitigate risks and ensure a smooth transition. If you’re ready to explore your options and get started on your census, call us at (888) 843-0880 or visit easeworks.com today!
Common Mistakes to Avoid During Transition
Transitioning from Health Net to a new health plan is fraught with potential pitfalls. Understanding these common mistakes can save your business time and money.
Delaying Action: Waiting too long to shop for a new plan can lead to rushed decisions. Start the process as soon as you receive your termination notice.
Ignoring Employee Needs: Failing to assess your employees’ ongoing treatments can leave them without necessary coverage. Ensure you have a clear picture of their healthcare needs.
Not Comparing Plans: Simply accepting the first quote you receive can be costly. Always compare multiple plans, including coverage options, deductibles, and premiums.
Overlooking Continuity of Care: Neglecting to consider how new plans will affect ongoing treatments can result in significant disruptions for your employees.
Canceling Coverage Prematurely: Ensure your new plan is secure before canceling your existing coverage. A gap in coverage can lead to financial burdens for your employees.
Step-by-Step Implementation Guide for a Smooth Transition
To ensure a seamless transition from Health Net, follow this step-by-step guide:
Review Your Termination Notice: Confirm your termination date, group number, and any specific requirements outlined in your contract.
Assess Employee Needs: Collect information about ongoing treatments, medications, and preferred providers from your employees.
Research New Plans: Obtain quotes from multiple carriers and evaluate coverage, costs, and provider networks.
Consult with Experts: Work with your HR team, a benefits consultant, or Easeworks to analyze options and make informed decisions.
Communicate Changes: Keep employees informed throughout the process. Transparency can help alleviate concerns and confusion.
Finalize Your New Plan: Once you’ve selected a plan, ensure all necessary paperwork is completed and submit it before the deadline.
Confirm Enrollment: Verify that all employees are enrolled in the new plan before terminating the Health Net policy.
Review Continuity of Care: Work with the new carrier to ensure ongoing treatments are covered and that any required authorizations are in place.
Real-World Scenarios and Outcomes
Understanding potential outcomes can help you prepare for the transition effectively. Here are a few real-world scenarios:
Scenario 1: Smooth Transition
A small business with 15 employees received their termination notice in September. They promptly assessed employee healthcare needs and began shopping for new plans. By December, they finalized a new policy effective January 1, 2027. As a result, their employees experienced minimal disruptions, with most maintaining their preferred providers.
Scenario 2: Delayed Action Leads to Issues
A mid-sized company delayed action until January, resulting in long underwriting wait times. They were unable to finalize a new plan before Health Net coverage ended. Consequently, several employees faced gaps in coverage, leading to financial stress due to unpaid medical bills.
Scenario 3: Overlooked Continuity of Care
Another employer failed to assess their employees’ ongoing treatments. When they transitioned to a new plan, several employees lost access to critical medications and treatments, causing dissatisfaction and productivity issues among staff.
These scenarios highlight the importance of proactive planning and thorough assessments during the transition process. Taking the right steps can lead to a seamless experience for your business and employees.
Understanding Your Options for Coverage
What types of plans are available post-Health Net?
After Health Net exits the group health market, you have several options to consider. These include traditional HMO and PPO plans from other carriers, as well as strategies involving a PEO (Professional Employer Organization). Each option comes with its own set of benefits and limitations.
When seeking new coverage, assess the network of providers, the deductible structure, and any specific benefit needs of your employees. This ensures a seamless transition while maintaining adequate health coverage.
How can I ensure continuity of care for my employees?
Continuity of care is crucial, especially for employees in ongoing treatment. To minimize disruptions, identify any current treatments, medications, or specialists. Consult with potential new carriers about their policies on continuity of care and whether they honor prior authorizations from Health Net.
Documenting these needs will help you present a strong case when negotiating with new insurers. California law mandates certain protections for ongoing treatments, so familiarizing yourself with these regulations can further safeguard your employees.
What happens if my group does not transition by the deadline?
If you fail to secure new coverage before February 28, 2027, your employees may experience gaps in their health insurance. This can lead to financial strain, especially if they require medical services during the transition.
In such a scenario, employees may need to turn to Covered California for individual plans. However, this option may not provide the same level of coverage they had under Health Net. It’s critical to act promptly to avoid these complications.
What are the financial implications of switching carriers?
Switching carriers can bring about various financial implications, including changes in premium costs and out-of-pocket expenses. Some plans might offer lower premiums but higher deductibles or co-pays, impacting your employees’ overall healthcare costs.
It’s essential to analyze and compare the entire cost of coverage, including administrative fees and potential extra costs for out-of-network services. A thorough financial assessment will help you make an informed decision that supports both your business and your employees.
Can I negotiate with new insurance carriers?
Yes, negotiating with new insurance carriers is not only possible, but it’s often necessary to secure the best deal. Leverage the knowledge of your current benefits and the needs of your workforce to negotiate favorable terms.
Highlight your company's stability and the potential for a long-term partnership. Many insurers are open to customizing plans that meet the unique needs of your group, which can lead to enhanced benefits and reduced costs.
California employers
Wondering what a PEO would actually cost?
HR, payroll, benefits, and compliance bundled — with a dedicated advisor. Most California employers pay less than managing it separately.
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