Mid-sized health insurer ConnectiCare competes with the big dogs for in-state customers, and in recent years it’s managed to stake out a dominant position in several challenging lines of business.
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Mid-sized health insurer ConnectiCare competes with the big dogs for in-state customers, and in recent years it's managed to stake out a dominant position in several challenging lines of business.
Despite competition from the likes of Aetna, Anthem and United Healthcare, since 2014, ConnectiCare has taken and held Connecticut market share leads in both Medicare Advantage plans and on the state's Obamacare insurance exchange, Access Health CT.
ConnectiCare's strategy to focus more attention on individual-consumer product lines, which aren't without their risks, has resulted in a significant shift in the company's revenue sources. While the insurer remains a player in selling employer-sponsored health plans, nearly half of its revenue now comes from “direct-to-consumer” products.
That's up from 15 percent four years ago, said ConnectiCare President Michael Wise during an interview at the company's Farmington headquarters, which houses 750 employees, including executives, salespeople and call-center workers. An aging population and the Affordable Care Act's mandates have created the opportunity in the individual market, but ConnectiCare's decision to pursue it has been deliberate, Wise said.
“There's nobody that's ignoring the direct-to-consumer business,” Wise said. “The question is 'who's positioned best to take that on?'”
He contends that ConnectiCare's virtually singular focus on the state for which it's named gives it a leg up on national players. While ConnectiCare's parent company is EmblemHealth, which is dominant in the New York market, ConnectiCare doesn't need to fret with regulations or competitive landscapes in other states. And the providers and hospitals in its network are all a modest drive away from its corporate headquarters.
“That's why we're going after it,” Wise said. “It doesn't mean we think our competitors offer poor products because they have headquarters in other states, but the focus really matters.”
As part of its ongoing consumer-facing shift and to mark its 35th year in business, ConnectiCare recently tweaked its logo. New signage adorns the front of its headquarters.
Six months ahead of the fourth annual Obamacare enrollment period, the company continues to play up its Nutmeg-native status.
“We think of Connecticut as more than just a spot on the map. We think of it as more than just a state. We think of it as home,” Wise said in an announcement about the rebrand.
Making it work
ConnectiCare has been selling plans on Access Health CT since the exchange's 2014 inception.
Anthem won the market share battle in the inaugural year, but ConnectiCare took the lead in 2015. In the most recent open enrollment period, which ended early this year, ConnectiCare further widened the gap, with approximately 57,000 enrollments to Anthem's approximately 37,000.
Meanwhile, nonprofit HealthyCT had 13,000 and United Healthcare had less than 2,000 enrollees.
Some insurers have cast doubt on the future of the exchange model. United Healthcare announced in April that it would exit Connecticut's exchange and those in a number of other states, after losing $720 million on that overall business in 2015.
Aetna — which had initially intended to join Connecticut's exchange, but pulled out before the exchange launched — disclosed that it lost as much as $140 million on its exchange plans in other states last year.
ConnectiCare's main exchange competitor Anthem has said it made money on exchanges last year, though it's unclear what its results were in Connecticut.
ConnectiCare is profiting from its exchange business, and it intends to participate in the fourth open enrollment period that begins in November, Wise said. Proposed 2017 rates for both exchange and off-exchange plans will start trickling in to state insurance regulators soon.
The exchange has been a winner so far for ConnectiCare, according to financial data the company provided to insurance ratings firm A.M. Best.
Access Health products netted $12.3 million for the insurer in the exchange's inaugural year and $13.6 million last year, A.M. Best data shows. Those products produced revenues of $140.2 million in 2014 and $199.1 million in 2015.
Wise said exchange profit margins have been in line with his expectations.
While some carriers are avoiding or rethinking their involvement with exchanges, Wise said ConnectiCare must help make the state exchange a success.
“We looked at it from the standpoint of 'how could we not participate and make this work in Connecticut?'” he said. “We don't have the choice to say that things aren't working so well in Connecticut, so I think we'll focus on Florida or Texas.”
That comment speaks to the difference between the Connecticut-focused insurer and some of its largest competitors, which operate in multiple states and could pull out of markets they don't like.
The Medicare long game
ConnectiCare is also leading Connecticut insurers in Medicare Advantage enrollments, but that hasn't done much for its bottom line over the past few years.
ConnectiCare has booked net underwriting losses in that product segment in four of the last five years, according to A.M. Best. Revenue has grown steadily over that period.
“Federal funding pressures are significant and we expect that will remain the norm,” Wise said.
However, he said his company remains committed to the market.
Though many insurers have been squeezed by the federal government's tightening of Medicare Advantage payments, insurers are playing a long game, according to Bridget Maehr, senior financial analyst with A.M. Best.
“I think most insurers feel this is something that is such a big business segment that they don't want to ignore it,” Maehr said.
She said aging populations in Connecticut and many other states are what's drawing insurer interest.
Insurers are also interested in keeping as many customers as possible, whether they're rich, low income, working or retired. Offering products on exchanges, in Medicare and to businesses enables that sort of retention.
Update: Broker spat settled
Earlier this year, four high-volume brokers that won a preferred broker contract from Access Health CT were upset when ConnectiCare informed them that their commissions would be 25 percent lower than the brokers believed their contracts stipulated.
Access Health CEO James Wadleigh fretted at the time that the situation could damage relations between the brokers — who sold thousands of ConnectiCare plans during the enrollment period — and the exchange's leading insurer.
But it turns out the worry was short-lived. Wise said the matter, which he characterized as a miscommunication, had been resolved.
Jennifer Lovett, owner of South Windsor's Crystal Financial, confirmed that she was made whole by ConnectiCare approximately six weeks after the Hartford Business Journal documented the dispute in a Feb. 15 story. She said she intends to keep selling ConnectiCare plans in the coming enrollment period.
“Since then, I think this has actually improved our relationship with them,” Lovett said. “They're still a good company, regardless of whether we had differences. We still have to do what's right for the client, and for a lot of clients, that is the right product.”
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