🔒CBIA’s health insurance marketplace loses insurer, pivots business model

Harvard Pilgrim Health Care is exiting the Connecticut Business & Industry Association’s insurance exchange, leaving the state’s largest business lobby with just one health insurer on its once rich private menu of plan offerings for member employers.

The pending separation represents the beginning of a major strategic pivot for CBIA’s 24-year-old Health Connections arm, which over the years has been a key revenue generator to its parent.

CBIA’s remaining carrier, Farmington-based ConnectiCare, will continue to offer traditional, fully insured health plans on the exchange, but will also introduce “level-funded” policies, which are an emerging self-insurance hybrid plan targeted at small employers.

While ConnectiCare’s new offering — branded “Fixed-Funding Solutions” — will be exclusive to CBIA members, it will compete with Aetna, Anthem, the Chamber Health Care Coalition and others that have already entered the level-funded or self-funded market for small groups (which generally means 50 employees or fewer).

The shift also comes at a time of heightened competition among insurance companies fighting to retain and gain access to the midsize marketplace, industry experts say.

Roberta “Bert” Wachtelhausen, ConnectiCare’s senior vice president and chief sales and marketing officer, said her company is launching the new plan because small employers — frustrated by high health premiums fueled by the Affordable Care Act (ACA) and state mandates — are increasingly willing to test out alternative coverage models to rein in healthcare costs.

“There’s been a shift as employers who just can’t tolerate the cost are moving to take on more risk to get out from under some of the [state and federal requirements],” Wachtelhausen said.

The CBIA and ConnectiCare have been allied for approximately 20 years, so an exclusive arrangement seemed like a natural fit, she added.

Employers who self-fund can avoid the ACA’s rules about how groups are rated and priced, and its requirement to provide a menu of “essential benefits,” which make coverage more costly. Self-funded plans are also not subject to the state’s 1.5 percent premium tax and its ever-growing list of health benefits that fully insured plans must cover.

The ACA has effectively homogenized health insurance available to small businesses on the fully insured market, forcing insurers to sell similar plans and making it less necessary for employers to join and purchase coverage through CBIA.

Big companies have long self-insured their health benefits, but the concept in more recent years has begun to trickle down to smaller companies.

Self-insurance or self-funding, according to Kaiser Health Foundation, is an insurance arrangement in which the employer assumes direct financial responsibility for the cost of claims.

An insurer or administrator typically oversees such plans.

Level-funding is a form of self-funding involving structured monthly payments to cover a claims reserve account and stop-loss insurance premiums. Self-insurance also often includes a stop-loss policy, but the levels at which coverage kicks in are usually lower in level-funded plans.

Unlike regular health insurance, self-funded and level-funded policies also typically send back some money each year to members that had lower-than-expected claims.

Besides potential cost savings, there’s also greater visibility into claims and where the money is being spent, which allows employers to be more flexible in their plan designs, said Kenneth Comeau, president of CBIA Service Corp., the subsidiary that houses Health Connections.

For employers, risks of stop-loss-style plans include increased financial skin in the game and the potential for more complexity. For workers, there’s a chance certain benefits required under regular health insurance will be excluded, though proponents of self-funded plans say the menu of services they cover are largely comparable.

Comeau said CBIA and ConnectiCare will begin pushing level-funded plans starting with renewals this month. Early quotes show ConnectiCare’s new plans could save CBIA members upwards of 25 percent off their fully funded healthcare costs, he said.

“In this ever-changing health-benefits landscape, you look for ways to bring value and make a difference for businesses out there,” Comeau said. “We’re really at one of those junctures.”

While CBIA has chosen to move forward solely with ConnectiCare, Harvard Pilgrim’s regional vice president Jason Madrak said there are no hard feelings.

He said the CBIA exchange was key to Harvard Pilgrim’s entry into Connecticut’s small group market back in 2014.

“CBIA has honestly been a very good partner for us,” Madrak said.

Harvard Pilgrim will still have CBIA members through next year, as its contracts expire.

Meantime, Harvard Pilgrim quietly introduced a level-funded offering of its own about 16 months ago, but Madrak said it was more of a defensive play in response to competitors doing the same. Harvard Pilgrim’s main focus in Connecticut remains fully insured plans, he said.

A former money maker

Founded in 1995, CBIA Health Service Corp. is one of the oldest private benefits exchanges in the country, and has been viewed by some as one of the most successful.

In 2014, CBIA Health Connections had four insurers, but it’s lost carriers over the years. Passage of the ACA may have had the most dramatic impact.

CBIA Health Connections had 91,000 benefit members during its 2006 peak, according to federal data. As of last year, however, that number had fallen below 20,000, according to the subsidiary’s federal labor department filing.

That precipitous drop has had financial ramifications.

CBIA’s exchange used to regularly generate several million dollars in annual revenue for its parent, but it lost money during the past two years.

The exchange lost $514,000 and $1.7 million in 2017 and 2018, respectively, according to CBIA’s tax filings. It’s a sizable hit, though CBIA’s largest source of revenue, member dues, is still trending steady at more than $4.6 million a year

“The past couple of years have been challenging, no question, but we’ve conservatively managed through that downturn,” said CBIA CEO Joseph Brennan, who added the revenue dip hasn’t detracted from CBIA’s core mission of influencing public policy.

“With luck, we’ll be as strong or stronger than ever moving forward,” he added.

The flip side of self funding

While self-funded policies can be a way for small businesses to save money, they could also have ramifications for those who stay in the fully insured market.

The Connecticut Insurance Department (CID), which regulates only the stop-loss insurance portion of self-funded plans, has been watching self-funding rise in popularity for years now, with some concern.

Experts say self-funded plans are pulling healthier groups from the small-group risk pool. The worry is the remaining pool will be unhealthier, leading to premium increases.

“We are always concerned when consumers do not have the full protection of state insurance laws and regulations,” CID Commissioner Andrew N. Mais told HBJ in a statement.

In some ways, the battle is already lost. More people in Connecticut have been covered by self-funded plans than by fully insured plans since 2011, according to UConn health economists.

Meantime, the fully insured small group market continues to shrink.

Total member lives in the small group market here have fallen from 226,836 in 2013 (the same year the state’s Access Health CT exchange opened) to 151,226 in 2018, according to data analyzed by Kaiser.