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March 8, 2021

As lawmakers debate health insurance reforms, Cigna plans to re-enter CT’s small group market

Photo | CoStar Cigna headquarters in Bloomfield.

Years after abandoning Connecticut’s small group insurance market, Bloomfield-based Cigna is preparing to launch a new health plan in the state targeted at employers with 50 or fewer workers.

Cigna is seeking regulatory approval from the Connecticut Insurance Department to begin offering a new small group plan in partnership with New York-based Oscar, an insurance-technology company that launched in 2012 to originally target the individual insurance market.

The two have joined forces to offer a new fully-insured health plan called “Cigna + Oscar.” The insurance product is relatively new, officially debuting nationally last year in just a few markets.

Cigna wants to begin selling the plan in Connecticut by July 1, regulatory filings show. It would be offered outside of the state’s health insurance exchange, Access Health CT.

The timing of the new proposed plan is noteworthy. It comes as lawmakers debate the future of the state’s health insurance marketplace, including a plan by progressive Democrats to launch a public health plan that would compete with private insurers and be available for small businesses, nonprofits and potentially others.

David Cordani

That has drawn the ire of Connecticut’s health insurance industry, including Cigna, which employs thousands of workers in the state. The last time a public health insurance option was being considered by lawmakers in 2019, Cigna CEO and President David Cordani reportedly threatened to move his company out of state if the legislation passed.

Cigna denied that such a threat was made, but the bill died shortly after that.

Cigna has not traditionally been a major player in small group health insurance, but Cordani told investor analysts last year he views it as an underserved market that could benefit from a technology-driven product.

Indeed, only 38.7% of Connecticut small businesses with 50 or fewer workers offer health insurance, according to the Kaiser Family Foundation, meaning a potential customer base does exist.

A key roadblock to adoption, experts say, has been affordability. That’s one of the reasons some state lawmakers are pushing a public insurance option.

During a quarterly earnings call with analysts in Feb. 2020, Cordani said small businesses are too often “left with limited options that are highly priced.”

“With Oscar ... we will offer small businesses access to affordable, fully-insured health plans that bring in choice and prioritize whole person health,” Cordani told analysts last year.

Employee-benefit experts say insurers are increasingly introducing new technology-enabled, value-based health plans — including for Connecticut small employers — that are more consumer friendly and focused on trying to better control costs and improve care.

The new plan

Cigna, which declined to comment for this story because its new proposed plan is still in the regulatory approval process, is not totally unfamiliar with the state’s small group market. It previously offered a small employer plan through the Connecticut Business & Industry Association but exited that space about a decade ago.

The health insurer and Oscar announced their partnership in Jan. 2020, and subsequently launched their first joint health plan in the fourth quarter of last year in a few select markets, including Atlanta, Tennessee and the San Francisco Bay area.

Connecticut would be among the earliest states to have access to the plan.

Cigna, an insurance giant that also owns pharmacy benefit manager Express Scripts, is largely known for administering self-insured plans for large employers, while Oscar initially focused on offering individual insurance coverage through state health insurance exchanges created under the Affordable Care Act.

Oscar has touted its technology platform, including a user-friendly customer app and 24/7 virtual urgent care, as a key differentiator. The company recently completed an initial public offering where it raised more than $1 billion.

Cigna and Oscar said they are sharing risk equally under a reinsurance agreement.

The proposed plan in Connecticut will offer integrated medical, behavioral and pharmacy services, and include deductibles that range from $0 to $5,500 and maximum out-of-pocket costs that range from $3,000 to $8,550, regulatory filings show.

Copays differ depending on the services. Coverage will include round-the-clock virtual care options, regulatory filings show, which has become increasingly popular during the pandemic.

Cigna had not filed premium rates as of press time.

Patricia Rivera

Patricia Rivera, who leads the Connecticut and Westchester County health practice of HR consulting firm Mercer, said the value proposition of the Cigna + Oscar offering will be its technology focus, and it could differentiate it from competitors in the state.

“Their entry into the small group market is capitalizing on the digitization of health care that we’ve seen accelerate during the pandemic,” she said. “The affordability of the plan remains to be seen. What does the risk pool look like? Who is jumping in? That will determine if it’s affordable.”

Rivera said Oscar started up as a technology company offering individual insurance and partnered with Cigna to tap into its larger provider network, which gives it access to new markets.

For the plan to be successful it will need to be marketed “really well,” Rivera said, because demand for small group plans “in Connecticut isn’t great.”

“The fact that less than 50% of employers offer a fully-insured health plan to their employees shows there is opportunity but also potentially a lack of appetite for it,” Rivera said.

The cost of health insurance and health care in general has been a major issue for years, although Connecticut employers that offer coverage, on average, saw more modest price increases in 2021.

Small-group health insurance premiums in Connecticut were projected to rise an average 4.1% this year, down from insurers' requested increase of 11.28%, according to the Connecticut Insurance Department.

Rivera said rate increases were smaller than usual in 2021 because utilization of healthcare services was down last year due to COVID-19, which forced many people to delay or cancel certain elective surgeries.

However, rates could spike again next year as more people receive care they’ve put off.

“What’s going to happen with rates in 2022 is a big question because utilization is expected to spike,” Rivera said.

Evolving market

Most major insurers — Aetna, Harvard Pilgrim Health Care, ConnectiCare and UnitedHealthcare/Oxford — offer small group plans in Connecticut either on or off the state’s insurance exchange, but they collectively only cover about 108,200 lives in a state with more than 3.5 million people.

Oxford Health Insurance, which offers an off-exchange product, has the biggest small group market share, covering more than 40,000 lives.

Jeff Hogan

Jeffrey Hogan, the northeast regional manager in Farmington for employee benefit consultant Rogers Benefit Group, said other insurers — including Anthem, Aetna and UnitedHealthcare — are introducing new tech-enabled, consumer-focused health plans for small businesses that offer apps to access care and patient data, virtual care and other tools that aim to better coordinate care, improve outcomes and reduce costs.

Plans are also increasingly introducing value-based care that begins to move providers away from a fee-for-service model, which Hogan said is a major cost driver in the healthcare system that makes insurance unaffordable for many small businesses.

Kenneth Comeau

Kenneth Comeau, president of CBIA Service Corp., a subsidiary of the Connecticut Business & Industry Association that houses the organization’s health exchange, said having another competitor in the state’s small group market “just makes everybody better.”

Called Health Connections, CBIA’s exchange offers insurance through ConnectiCare ranging from traditional, fully-insured health plans to “level-funded” policies, an emerging self-insurance hybrid plan targeted at small employers.

“There’s a lot of innovation that goes on” in Connecticut’s insurance marketplace, Comeau said. “There's plenty of opportunity out there.”

Recent innovations include the rise of level-funded plans, in which employers still contract with insurance companies but take on more of the financial risk.

“There has been more and more movement to try to create options for employers in the private sector,” Comeau said. Some innovations within the market that are likely to outlast the COVID-19 pandemic are telehealth and “voluntary products,” which allow for more customizable benefits paid for by employees entirely through payroll deductions.

“The private sector will continue to work to innovate to create options within the framework that the regulatory environment allows,” Comeau said.

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