🔒Health insurers rein in small group rate hikes

Connecticut's small employers, which have long felt the brunt of ever-increasing healthcare costs, could get some relief in 2016.

One major insurer, Anthem, has requested an average 7.5 percent rate decrease for small business health plans it will sell on and off Connecticut's insurance exchange next year.

Meanwhile, Aetna is asking state regulators to essentially keep its small group rates flat for 2016.

Four other small group insurers — Harvard Pilgrim, HealthyCT, Connecticare and Oxford Health Plans — are asking, on average, for modest, single-digit rate increases.

The proposed rates, which still must be approved by the state Insurance Department, contrast with the double-digit premium increases many small employers have endured in recent years and could be a sign that the small group health insurance market is stabilizing after years of uncertainty, said brokers, insurance executives and regulators.

That's a bit of good news for employers, which have dealt with escalating healthcare costs by retooling their benefit plans and shifting more costs onto their workers.

“Overall, the [proposed 2016] rate increases are benign compared to previous years,” said Paul Lombardo, an actuary for the Connecticut Insurance Department, who reviews all rate requests.

Several factors are impacting 2016 rates, brokers and insurance executives said. In some cases, benefits utilization has leveled off following a post-recession spike in the amount of health care consumed by individuals. Also, following years of uncertainty and change brought on by the Affordable Care Act, some insurers last year saw their claims experience come in lower than expected and are readjusting their rates accordingly.

Competitive pressures are also playing a role: The small group market will expand in 2016 for the first time to include employers with 51-100 workers, opening up a significant opportunity for insurers to grab new market share. It's a move that's enticing insurers to be more aggressive on plan pricing.

“Some carriers that have been in the Connecticut small group market for a long time may be concerned with losing market share as a result of their uncompetitive rates for the past couple of years,” said Richard D. Lovallo, an underwriter for C.M. Smith Agency in downtown Hartford.

Lovallo said Anthem and UnitedHealthcare/Oxford in particular have ceded market share because of their less competitive rates in the last few years; their decision to decrease and slightly increase rates, respectively, could be a sign they are trying to protect their remaining turf and/or plow new ground.

Marketplace disruption

The small group rate requests pitched by insurers include health plans that will be sold on and off the state's health insurance exchange later this fall. They go into effect Jan. 1 and cover about 168,000 Connecticut residents. State insurance regulators are still reviewing the rates and could demand some changes.

For example, a recent decision by the board of the state's insurance exchange, Access Health CT, to increase its assessment fee on all individual and small group health plans sold in Connecticut (from 1.35 percent to 1.65 percent of premiums) will likely mean slight increases to the current rate proposals.

Lombardo said the percent of premiums insurers spent on claims in 2014 was lower than expected, which partially reflects why this year's rate requests are, in most cases, more modest.

That could have resulted from a higher percentage of young people signing up for insurance in 2014, which was the first year the Affordable Care Act's individual mandate went into effect. The law, which requires most people to buy insurance or pay a penalty, aims to get more young people insured so they can expand the risk pool and help keep costs in check for patients who use the healthcare system more often.

“Young invincibles are signing up because now they have to,” Lombardo said.

Anthem's proposed 7.17 percent rate decrease was the lowest request made by any insurer. That small group plan covers 40,000 people. Connecticare requested the largest rate increase of 8.6 percent but that was only for a small group plan covering 48 people. The Farmington-based insurer pitched a 5.6 percent rate hike on another small group plan that covers 48,000 people.

Another major factor impacting 2016 rates is the expansion of the small group market, which will include employers with 51-100 employees beginning Jan. 1.

The change, also brought on by the Affordable Care Act, will force groups with 51-100 workers to face more restrictive plan rating rules as well as additional benefit and cost-sharing requirements, brokers and insurers said. Some employers will see their rates increase and could turn to a self-insured health plan to contain costs, Lovallo said. Other companies will see their costs go down. Long-term, the expansion of the small business risk pool could help rein in premiums.

Regardless, the change means small group insurers will have an expanded client base to sell to during this fall's open enrollment season, which means maintaining competitive rates — even if it cuts into margin — will be important.

“Everyone is going to be aggressive any time you see marketplace disruption,” said Jason Madrak, Harvard Pilgrim Health Care's vice president for Connecticut. “Anytime that happens you're going to see all insurers aggressive on pricing.”

Cost containment

Michelle Zettergren, Connecticare's senior vice president and chief sales and marketing officer, said insurer's cost management programs, including the adoption of accountable care organizations and other initiatives aimed at improving care quality, are starting to produce results that are impacting health plan rates.

Connecticare, for example, has more than 15 accountable-care relationships with Connecticut doctors and hospitals that aim to better coordinate patient care to keep patients healthier and out of high-cost emergency rooms. The insurer employs a care management team that works with providers to coordinate patient follow-up appointments and care.

The results so far are encouraging, Zettergren said. Patients that participate in Connecticare's collaboration arrangements see their doctors 10 percent more often and are admitted to the hospital and emergency room 9 percent and 6 percent less often, respectively.

“Based on quality indicators we are seeing better health outcomes,” Zettergren said.

One area that insurers and regulators say is cause for concern, however, is prescription drug costs. The increase in utilization of expensive specialty drugs for diseases like Hepatitis C and cancer are significantly driving up costs and could lead to larger rate increases in the future, Zettergren said.