The Affordable Care Act is forcing a sea change in employer health plans, and nowhere is that trend more evident than with the state’s largest small business insurance exchange.
CBIA Health Connections, which has offered small employer health coverage since 1995, had to overhaul its 2014 plan offerings to comply with new mandates from federal healthcare reform, which has significantly impacted consumers’ rates and plan designs, said Phil Vogel, senior vice president of CBIA Service Corp., which runs the exchange.
CBIA is now offering fewer plans, with narrower options as the ACA limits the types of products insurers can offer consumers, Vogel said.
The impact on premium rates has been significant: CBIA’s small business consumers have seen price swings ranging from a 100 percent increase to a 75 percent decrease.
“Every plan has changed,” Vogel said. “Rate predictability for any company is extremely difficult right now.”
The Affordable Care Act has many new requirements for insurance plans that have gradually rolled out since 2010, but some important new changes kicked in Jan. 1.
Carriers, for example, can’t set annual dollar limits on the amount of insurance coverage an individual or family may receive, or charge higher rates due to gender or health status, which Connecticut laws previously allowed.
Additionally, older Americans can’t be charged more than three times what young adults pay for insurance (previously the limit was five times more).
Employers are also being hit with new taxes and fees.
The changes, Vogel said, created winners and losers among small businesses purchasing health insurance. Firms with young, healthy employees, for example, pay more for coverage, while companies with older, less healthy workers saw rate decreases.
That’s been a consistent trend with insurance plans being sold across the country, as health reform tries to make coverage more affordable to groups that traditionally paid the most.
Meanwhile, larger families with older children, between the ages of 21 to 25, saw higher rates because of a change in how family members in employer-sponsored plans are priced, Vogel said. An employee’s spouse and children now get their own individual rate factored into the premium pricing model.
Coverage Redesign
To comply with the new ACA rules, CBIA had to work with its three insurance carriers — Aetna, Connecticare, and Oxford/United Healthcare — to significantly transform its health plans, Vogel said.
Health Connections, which is only open to CBIA members, now offers fewer choices — 24 plan options instead of 32. There are tighter restrictions on plan designs because the ACA requires insurance policies to meet specific coverage levels.
Bronze plans, for example, offer the least generous coverage and require insurers to pay only about 60 percent of an individual’s medical costs, while platinum plans are the most generous and require insurers to pay 90 percent of medical costs. Silver and gold plans must cover 70 percent and 80 percent of medical costs, respectively.
In certain cases, insurers have added higher deductibles and co-pays to meet those strict guidelines, Vogel said. Many plans offered through CBIA Health Connections, for example, now require co-pays for X-rays and lab visits, which previously didn’t exist.
“You have to fit a square peg in a round hole,” said Jason Gutcheon, a West Hartford broker who sells CBIA plans.
Gutcheon said CBIA has done a good job crafting plans that small business consumers want, and many employers have been opting for higher-end coverage, including a gold plan that has a $1,500/$3,000 deductible and $3,000/$6,000 maximum out-of-pocket expense for an individual/family plan.
Most CBIA plans, however, meet the silver coverage level and no platinum plans are available because they’re too costly, Vogel said.
“They crafted several plans that were sensible to the market,” Gutcheon said.
In terms of costs, premium rates under the new ACA guidelines have been scattershot, brokers said. Although some CBIA customers saw their rates double, Vogel said more small employers, particularly those with older workers, actually saw their rates decrease.
Gutcheon said most of his clients haven’t seen major rate increases, but there were some outliers: A few younger, healthy firms saw rates shoot up 50 percent.
John F. O’Connell, Jr., president of C.M. Smith Agency in Hartford, said rates for his CBIA clients ranged from a 6 percent decrease to a 3 percent increase.
New Competition
CBIA’s experience isn’t unique. Health insurers have been forced to redesign most of their products in recent years, regardless of where they are being sold.
Access Health CT, the state’s new federally mandated health insurance exchange, offers a new suite of products for individuals and small businesses, which has created new competition in the market.
It also created considerable confusion, Vogel said.
“I keep getting asked by people ‘Do I have to buy from the new insurance exchange?’ ” Vogel said. “There are a lot of options in the marketplace.”
Vogel said he doesn’t consider Access Health CT direct competition because the state-run exchange’s target consumer is uninsured and low-income individuals. Access does, however, offer small employer health plans, which have wooed away some CBIA customers, Vogel said.
A challenge CBIA faces, Vogel said, is marketing itself against Access Health CT, which is spending millions of dollars in advertising to raise awareness of its products.
CBIA doesn’t have that type of marketing muscle, so it’s focused on reaching small businesses and brokers through seminars and other outreach efforts, Vogel said.
