Higher rates lead to health plan market-share struggle

HBJ PHOTO | Matt Pilon ConnectiCare's new President Eric Galvin is fighting to maintain small group market share after an unprofitable 2016 forced the insurer to raise its rates.

Jason Gutcheon, broker, Professional Business Insurers

Katie Kehoe, head of sales and marketing, Robert Hensley & Associates

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By Matt Pilon

[Editors note: Parts of this story, which went to press March 23, have been updated to reflect that Congressional Republicans' healthcare reform bill did not have enough support to pass.]

So far this year, Avon employee-benefits firm Robert Hensley & Associates has switched 75 percent of its small business customers to a new health insurance carrier.

Though there are still more small group clients to enroll in the coming months, that churn rate is abnormally high — the highest in at least three years, said Katie Kehoe, Hensley's head of sales and marketing.

Meanwhile, West Hartford broker Jason Gutcheon of Professional Business Insurers said he's experiencing much of the same with his small business clients.

“There's a lot of movement this year,” Gutcheon said. “A lot more shopping around.”

Brokers say higher-than-usual premium increases in Connecticut this year have led a significantly larger percentage of companies to switch carriers or plans in search of more affordable insurance. It's also led to a market-share fight among insurers, with one health plan in particular — Anthem — aggressively adding new clients, brokers say. Conversely, Farmington-based ConnectiCare, which struggled financially in 2016, has lost some small business customers.

The premium spikes have hit the small group market (employers with one to 49 workers) hard, with the average plan — sold on or off the state's insurance exchange, Access Health CT — experiencing a 12 percent rate increase. The volatile individual market was even worse, with the average Connecticut plan experiencing a nearly 25 percent rate increase.

Those are some of the highest rate hikes in years and they occurred in many other states, heightening the political rhetoric around the need to repeal and replace Obamacare.

More people using health services is contributing to the higher rates, as is a controversial “risk-adjustment” program adopted under the Obamacare, which aims to compensate insurers with sicker populations at the expense of those with healthier ones.

Shopping normal in bad years

When insurance rates are stable the propensity for a group to change carriers is very low, Gutcheon said. Switching takes time and effort for both management and workers.

It's not unusual, however, for businesses and individuals to comparison shop when insurance premiums spike. And in those years, at least one insurer tends to step up to try to scoop up market share.

This year, Anthem, already the state's largest insurer, appears to be winning the market-share race in the small group market.

Virtually all of Hensley's clients that switched carriers went to a preferred provider organization plan (PPO) sold by Anthem. Gutcheon said many of his clients chose the same plan.

PPOs, which are more common in Connecticut than HMOs, allow people to pay less for care if they visit a doctor in a preferred network. The plans also often include coinsurance and higher deductibles.

Gutcheon and Kehoe — whose firms each have hundreds of clients and are not beholden to any specific carrier — said the Anthem PPO plan is relatively competitive both on price and for what it offers, and has enabled a number of clients to avoid sizable rate increases.

It includes an overall deductible of $3,550 for an individual and $7,100 for a family, with out-of-pocket limits of $7,150 and $14,300, respectively, according to a copy of the plan obtained by the Hartford Business Journal. Copays to see a doctor for anything other than preventive care are $40 for a primary care visit and $50 for a visit to a specialist.

Gutcheon said Anthem officials told him the insurer had a record-breaking enrollment month in January.

Leslie Groundwater, an account manager at Robert Hensley & Associates, said she believes Anthem was surprised by the volume it experienced in response to the plan, known as Silver Century Preferred 3550.

“We had a lot of problems in January moving our business there,” Groundwater said. “[Anthem officials] weren't getting IDs back to us [fast enough].”

Anthem did not respond to requests for comment for this story.

Among the insurers that appear to be losing small group market share so far this year are ConnectiCare and Aetna, according to local experts.

ConnectiCare currently has approximately 60,000 small group clients, making it a market-share leader. But it's fighting to hold on to those customers following an unprofitable 2016 that forced the company to increase average small group premiums 15 percent.

“Certainly the rate action does not help us from a retention standpoint,” said Eric Galvin, ConnectiCare's president and chief operating officer, in a recent interview at the company's Farmington offices. “It is an extremely tight race in the group segments. There's a lot of aggressive activity in the group markets.”

Galvin, who succeeded CEO Michael Wise earlier this year, said market-share wars are a near constant in the insurance business, but he said companies that undercut too heavily are likely to face consequences a few years down the road when they are forced to seek rate increases.

ConnectiCare lost approximately $50 million in 2016, recording heavy losses in its individual market business and ceding its leading position in Medicare Advantage to UnitedHealthCare — something it hopes to regain in the next year by introducing a zero-premium plan, Galvin said.

Individual market uncertainty

With President Donald Trump and Congressional Republicans seeking to make good on a years-long pledge to repeal and replace Obamacare, there is plenty of uncertainty these days with Connecticut's Obamacare exchange, Access Health CT.

[Editor's note: On Friday, after this story went to press, Republican House Speaker Paul announced that Obamacare replacement legislation had failed to gain enough political support. Ryan said Obamacare will be the "law of the land" for "the foreseeable future."]

Should Republicans manage to accomplish any significant Obamacare changes over the next few years, ConnectiCare would likely be the insurer with the most at stake. The company added 16,000 new individual-market exchange customers this year, enrolling 69 percent of the 111,542 total customers that originally signed up for a plan sold through Access Health. (Nearly 10,000 of those customers have dropped their coverage since open enrollment ended Jan. 31.) ConnectiCare benefited from the absence of HealthyCT, the nonprofit insurer that recently ceased operations.

Meanwhile, the exchange's only other participant, Anthem, saw its market share drop.

Anthem recently informed Access Health that it wasn't ready to commit to the exchange in 2018, given uncertainty at the federal level. Anthem is the only insurer that sells small group coverage on the exchange. It also sells individual health plans.

ConnectiCare said it hopes to offer individual health insurance on and off the exchange in 2018, but hasn't made a final decision.

Access Health CEO Jim Wadleigh said last week that exchange employees have been taking calls from customers who are cancelling their recent enrollments, due in part to the prospects of a new federal healthcare law replacing Obamacare.

The gist, Wadleigh said, has been: “I want Trumpcare, please drop my insurance.”

That's despite the fact that Congress hasn't yet adopted a new healthcare law, and now seems less likely to do so in the near future.

“There is confusion out there that people don't think they have to have insurance anymore,” he said.

Stricter paperwork rules — aimed mainly at stopping people from signing up for insurance only when they need it — are also curbing enrollment.

There are currently 9,700 customers who owe documentation to Access Health, and they could lose coverage by June if they don't provide it.