March 4, 2013

Cigna opts not to compete in statewide exchange

HBJ File Photo
HBJ File Photo
David Cordani, CEO, Cigna

Access Health CT got a strong initial response from insurers with nine health plans announcing their intentions to offer coverage within the state's health insurance exchange once it becomes operational later this year.

Almost all the major players in the state — Aetna, Anthem, Connecticare, and United Healthcare — said they plan to compete for business from the estimated 200,000 individuals who may seek coverage through the exchange, which will be an online marketplace where consumers can shop for coverage.

But there was one noticeable hold out.

Bloomfield insurer Cigna Corp. is opting not to participate.

The decision may have been a surprise to some, but Cigna has not been a major player in the individual or small business insurance market, which the exchange is primarily serving. It was just a few years ago that Cigna dropped out of the exchange operated by the Connecticut Business & Industry Association, which serves small businesses.

Still, a Cigna official said the company will participate in some statewide exchanges, just not Connecticut's, at least initially.

"We have been analyzing the exchanges and had several meetings with the Connecticut Exchange to understand their approach to building a state-based exchange," said Cigna spokesman Joe Mondy. "We expect to enter a select number of exchange markets where our offerings will best meet the needs of the customer. While we have a strong offering in Connecticut, we would not be able to meet the needs of the CT exchange customer at the level we believe is required and consistent with our mission of improving the health, wellbeing and sense of security of the people we serve. "

Mondy said Cigna has not ruled out joining Connecticut's exchange in the future but it likely won't happen anytime soon.

That is because insurers who choose not participate in Connecticut's exchange when it starts up later this year, will be locked out for a two-year period, said Jason Madrak, a spokesman for Access Health CT.

That two-year lock out rule was established by the exchange board to create an incentive for insurers to begin offering coverage within the exchange right away. The idea is to reward insurers willing to take a risk by offering plans in a new marketplace, and to prevent new competition from coming in right away only after they have seen success.

"The Exchange would like as many carriers as possible to participate in order to offer residents a broad array of plan options, as well as spur competition in this new marketplace," Madrak said. "We hope that as the Exchange launches and we begin to see it operating successfully, carriers who are not currently participating will reassess their approach and decide to join us."

Madrak said there is still an opportunity for Cigna to change its mind and join the exchange by October, but that decision would have to be made soon. Insurers will have to begin submitting health plans for approval to the Connecticut Insurance Department in the coming months.

The two-year lock-out period could also mean bad news for Massachusetts nonprofit health plan Harvard Pilgrim, which is looking to break into the Connecticut market. Harvard Pilgrim is going through the regulatory process to get licensed in Connecticut, but that might not happen soon enough for Harvard Pilgrim to be ready to offer coverage in the exchange, sources say.

Although Cigna is one of the largest health insurers in the country, they only have a small market share in their home state. And the company has never been a major player in the individual health insurance market.

In fact, Cigna only offers individual plans in 10 states, including Connecticut, said Mondy, the Cigna spokesman.

At the end of 2010, the latest data available from the Connecticut Insurance Department shows Cigna had $113 million in health insurance premiums in the state, which represented only 2.3 percent of the nearly $5 billion market.

Cigna has largely focused on selling health plans to commercial customers, although their strategy has started to shift with the major expansion of health insurance coverage that will begin next year thanks to federal health care reform.

The Accountable Care Act requires most Americans to buy health insurance and provides tax credits and benefits to qualifying small businesses and individuals to help them find more affordable coverage. The law also significantly expands Medicaid eligibility.

Cigna CEO David Cordani has said publicly that his company sees federal reform and specifically the exchanges as more of an opportunity than a threat, because the company doesn't have a huge book of individual or small business customers that may opt for coverage through the exchange.

Getting buy in from the insurance industry is a make or break issue for the exchange to have a shot at being successful. The other issue, of course, will be whether or not health plans offered in the exchange will be affordable.

With the exchanges being a key part of federal health care reform, the stakes are extremely high.

Insurers faced a Jan. 4 deadline to notify Access Health CT of their intent to participate in the state's exchange.

Five health insurers including Anthem, Aetna, Connecticare, United Healthcare, and HealthyCT have notified Access Health CT that they plan to offer coverage within the exchange.

Meanwhile, four other insurers including MetLife, Delta Dental, The Guardian Life Ins. Co., and Renaissance Dental have told the state they plan to offer dental insurance coverage within the exchange.

Keith Stover, a lobbyist for Connecticut's insurance industry, said the exchange's leadership team has been doing a good job making health plans feel welcomed, which is why most insurers signaled their intent to join.

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