🔒Chambers of commerce eye self-insurance model for small-employer health benefits

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Self-insuring employee healthcare claims takes significant capital and a stomach for volatility, which is why it's long been the domain of large companies with hundreds or even thousands of workers.

But smaller companies in Connecticut and across the country are increasingly finding ways to self-insure, spurred by the ever-rising cost of group health insurance and aided by policy protections that smooth volatility and spread risk.

Now, leaders from various Connecticut chambers of commerce are working on a novel self-insurance strategy, one they hope can slow premium growth and let their small and mid-sized member companies share in the savings during years with low claims activity.

Just as important, chambers hope the new offering will bring them greater relevance following years of stagnant and shrinking memberships.

”We have to really offer value and we have to do it in a different way,” said JoAnn Ryan, president of the Northwest Chamber of Commerce for the past 18 years. “It can't be all networking events.”

Stephen Glick, who has led a benefits exchange for Connecticut chambers since 1992, is orchestrating the effort.

He and other chamber leaders are trying to convince businesses with at least 40 employees to enroll in a self-insurance plan offered through Nationwide Insurance and an Ohio-based alternative risk transfer specialist called Roundstone Insurance.

Nationwide offers medical stop-loss policies to self-insured employers, which mitigates a company's risk if there are unexpectedly high claims.

Stop-loss defines the maximum dollar amount that employers must pay for their claims for both individual employees and the overall company. After a certain threshold is reached, the insurer picks up the remaining tab.

An out-of-state captive insurer owned by Roundstone reinsures the Nationwide policy.

While captives and stop-loss protections aren't new in Connecticut, the effort to group relatively small and otherwise unrelated chamber members into a risk pool is.

The idea is to spread stop-loss claims over a larger group, mitigating financial risks to any single employer.

Glick said he spent about two years researching and evaluating Roundstone's model, and is convinced it can help smaller employers better control healthcare costs.

“We have a new direction,” said Glick, a long-time insurance agent who is president and founder of the Chamber Insurance Trust (CIT) in Orange.

Obamacare's impact

CIT's effort harkens back to a pre-Obamacare era in which chambers marketed to their members custom-designed health plans, which were seen as true perks and helped drive up chamber membership counts.

However, many insurers pulled back from such offerings in the wake of the Affordable Care Act, which beefed up coverage requirements and mandated certain benefits, limiting plan design flexibility and making chamber products — and many other group plans — less affordable, Glick said.

As a result, the number of companies that purchase insurance through CIT has plummeted. In the mid-2000s, about 40,000 people were covered by a chamber policy sold by CIT. Today, that number has been cut in half, said Glick.

Meanwhile, many chambers have seen double-digit percentage declines in their membership counts over the past decade.

While Glick and some key allies in chamber leadership are sold on Roundstone, they have work to do convincing businesses to join the relatively complex self-insurance arrangement.

CIT is working with its network of brokers as well as chambers to help sell it.

“This is a learning curve,” said Candice Corcione, executive director of the Tolland County Chamber of Commerce. “People have to understand what a captive is.”

Legally, self-insured companies are able to avoid many Obamacare mandates, which can lower premiums.

Under the Roundstone model, in good years, unspent premiums are returned to member companies.

“It's an honest type of program and profits are not being diluted directly to the principals of a major insurance company,” Glick said.

Roundstone President Michael Schroeder said that employers enrolled in his company's risk pools, which contain at least 15,000 people each, have seen over the past 12 years annual premium increases closer to 2 percent to 3 percent, compared to some of the big hikes in the small-group market.

“In four years with a traditional insurer you will come close to doubling your cost, whereas four years in our model, you've gone up 10 percent,” Schroeder said.

He said Roundstone has worked with chambers in Nevada and Ohio, as well as several private schools in Connecticut.

Worst-case scenario

While self-insurance often brings concerns about potential big swings in claim payments from year to year, Schroeder said the typical worst-case scenario is that a company with a lot of claims might see its premiums grow at a similar rate to the regular, fully insured market.

“What the captive has brought to the table in the past 10 years has been the ability to really reduce that volatility,” he said. “That fear of volatility is lessened in these pooling models.”

Besides the Roundstone offering, another self-insurance option that's emerged from the likes of Aetna, Anthem, Cigna and others is known as a “level-funded” plan, which returns a portion of premiums to employers in years with light claims activity.

Todd Rein, a partner at Hartford Financial Associates in East Hartford who focuses mainly on small group health insurance, said a 40-employee company may find the captive model too risky.

“It's a bit of a tougher sell for a smaller company because there's a little bit more risk,” he said.

Still, Rein is happy to have any new options to show his clients, which have been hit with premium increases this year ranging from 10 percent to as high as 50 percent.

“I've been doing this 35 years, and across the board it's the worst renewal season I've ever been through,” Rein said.

Size matters

While CIT's enrollment efforts are in their infancy, the hope is to get 3,000 to 4,000 companies signed up with Roundstone, which the Ohio captive insurer says would be sufficient to form a Connecticut-specific risk pool.

At that point, the chambers and their benefit advisors could customize the health plan by adding cost-containment strategies, including leveraging their numbers to contract with certain provider networks or get discounts on specialty pharmacy products — much like a regular insurer does.

Glick said he also hopes that smaller employers, with fewer than 40 workers, could join the plan at that point.

Schroeder said the effort is unique for Roundstone, which has not built a state-specific pool for any other group, though it has worked with industry associations with members in multiple states.

But even if CIT can't wrangle enough enrollees, companies that do sign up could still see some healthcare-costs relief.

Glick said he's hopeful about what the self-insurance model could mean for the chambers he has served for over 25 years. He views the effort as part of his legacy.

“I believe the value of the benefits would be an anchor for membership,” he said.