Byline: ELIZABETH MACBRIDE
Empire BlueCross BlueShield's decision to pull back from the small group market this fall merely reinforced what most company owners already knew: They are facing a tumultuous market for health insurance, one in which prices continue to climb, plan designs are growing skimpier and skimpier, and there are fewer insurance companies to pick from.
'People are just buying down,' said Richard Allen, president of American Corporate Benefits Inc. Companies are opting for plans with fewer benefits, and employees are swallowing hard and accepting the changes. 'It used to be that if you were going from a $5 to $15 copay, it was the scuttlebutt of the company. Now you go from $25 to $50, and no one blinks an eye.'
Experts and brokers say three insurance companies are now vying for the small business market, each offering about 10 to 20 plan designs: Oxford/UnitedHealthcare, EmblemHealth and Aetna. Another insurer, Atlantis, is a marginal player.
Shaking up the market
Empire's announcement that it was slicing its unprofitable small group business by two-thirds in the fall rocked the market. The plans it is cutting cover about 20,000 small groups, representing as many as 200,000 members. Empire decided recently to phase out about seven small group products by April 1, 2013, following talks with the state Department of Financial Services. The original deadline was April 1, 2012.
'There was a lot of indignation, a lot of 'How the hell can they do that?'' said Matthew Brady, principal of Berry Hill Consulting, a brokerage in Hicksville, L.I. He has about 75 clients with Empire plans. 'I told them the carriers are in business to make a living. They are not our friends.'
Some small businesses, hit with the news of their Empire plans being cut, have already acted. Winston Himsworth, president of Westbury, Conn.-based Tel/Logic, which has 18 employees, said he's moved his workers from an Empire high-deductible plan to a similar plan from Oxford.
He's paying 10% more. Even so, he said, 'we lucked out. We found something and were able to move people into it quickly.'
Though Empire remains in the market with about a half-dozen options, brokers say the plans are not competitively priced. In addition, Empire has asked for rate increases of 14.3% to 29.9% on the remaining plans. (Empire is also slashing broker compensation on all its plans by about 75%, which is likely to deter sales.)
Empire's move caught companies by surprise, adding to the sense that the market is fast becoming impossible for small businesses to navigate.
Not everyone believes that the number of carriers will continue to shrink, or even that fewer carriers and plans are worse for small businesses.
'These things tend to be cyclical,' said Peter Newell, director of the United Hospital Fund's Health Insurance Project. 'And how much choice is good? A lot of people are thinking about that right now.'
He said that the small business market in New York remains relatively robust. New York's small businesses still have a variety of carriers and options to choose from, including in-network-only plans, plans with out-of-network coverage, high-deductible plans and HMOs, said Mr. Newell.
'Not a healthy market'
Mr. Newell acknowledged that Empire's action follows other companies' moves to winnow the number of plans they offer, as well as the flat-out withdrawal of some insurers, including Cigna, and consolidation among other players. HIP and GHI, for instance, merged to form EmblemHealth about five years ago.
'This is not a healthy market,' said Sheila Talty, director of pharmacy and operations for Empire. The company was aiming for margins of 3% in its small group business, she said, and could not hit even that slim number.
Empire executives have said that the recession and the rising cost of medical care are changing the makeup of the pool of insured workers: Those who tend to be the heaviest users of health care are the people who make sure they buy it. That makes it harder for insurers to turn a profit.
Whatever the market looks like now, it's a pretty sure bet it will look different in two years, when the exchange mandated by the health-reform law goes into effect. Small businesses are supposed to be able to buy insurance at cheaper rates through the exchanges, yet their success will depend not only on their technology and design, but on how many and what kinds of plans private insurers offer.
Until some of those questions are answered, small businesses will be left to play their annual game of musical chairs, trying to find an insurer and a plan that keeps costs manageable while still allowing them to compete for talent with big businesses.
Tumultuous year
Insurers, for their part, are preparing for an unusually tumultuous year. It's hard to say exactly how many members will be affected by Empire's move, but most groups in the small business market include fewer than 10 people, said industry sources, who estimated that the number of people affected would be between 140,000 and 200,000.
'It's a lot of people in motion at once,' said Bill Golden, CEO of UnitedHealthcare Employer & Individual of New York.
Oxford/UnitedHealthcare, which has the largest share of the small group market at 27%, offers more than a dozen plans, including one called Liberty HMO that covers more than 140,000 members.
Mr. Golden said the company had no plans to 'start withdrawing or doing anything differently.'
Mr. Brady, the broker, said he expected Oxford to win many of Empire's former customers. 'It seems the most natural choice,' he said. 'It has the volume of doctors.'
EmblemHealth did not return calls for comment, but has a list of 10 small group plans on its website.
Brian Madden, Aetna's director of small group sales and service for New York and New Jersey, said he expects to see an increase in business in the company's consumer-directed plans, meaning those that work with health savings accounts. The company offers a total of 15 plans with prices that range from $318 per month per employee to $2,165.
'We're very happy where we are from a benefit design and rate standpoint,' said Mr. Madden. 'There is no plan at this point to consolidate or eliminate any plans. We're monitoring the situation daily and closely.'
Copyright 2012 Crain Communications Inc. All Rights Reserved.
