🔒Policy shift allows mid-sized employers to keep health plans

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Congress offered and Connecticut has accepted.

State Insurance Commissioner Katharine Wade notified insurers and employers this month that she will delay a Jan. 1 expansion of the small-group insurance market in Connecticut.

That means companies with between 51 and 100 employees won't be forced to purchase health benefits next year with businesses that have 50 or fewer workers. The exact impact of the policy shift, right now, is unknown, insurance experts and brokers say, but the decision could save some mid-sized employers from having to pay more for health benefits. Other mid-sized employers, brokers say, could have reduced costs by shopping in the small- business pool, which has stricter rules about rating factors and required benefits, giving insurers less wiggle room to price risk.

Most states are expected to join Connecticut in delaying the expansion, though Colorado, Nevada and Vermont have said they will forge ahead and broaden the definition of a small employer.

The policy shift is a result of Congress passing the Protecting Affordable Coverage for Employers (PACE) Act earlier this month. The law gives states the ability to keep the longstanding definition of the small-group insurance market, rather than expand it to include companies with up to 100 employees.The timing of the change comes at a busy time in the health beneifts world, with Obamacare open enrollment starting in November and a large percentage of employers looking ahead to January renewals. It has created confusion for employers and insurers, which filed rate requests for small-group plans kicking in Jan. 1 months ago.

The Insurance Department issued an Oct. 9 bulletin informing insurers their decision not to expand the small-group market, giving insurers just seven days to refile 2016 small-group plans.

However, the department said it would not accept filings that increase rates. Insurers will be able to ask for rate increases that would take effect for plans sold or renewed in the second half of next year, based on changes in provider networks and utilization trends, the department said.

As of press time Thursday, the Insurance Department had not posted any refiled small-group plans on its website.

Brenda Gothers, an account executive in the Farmington office of benefits consultant the Lockton Companies, said half of her clients renew at the start of the year. Those mid-sized employers that had been shopping for small-market plans are now changing gears to look at a new set of offerings.

“The time of year is lousy,” Gothers said. “February would have been easier [for the change].”

Phil Vogel, who oversees the Connecticut Business & Industry Association's private insurance exchange, CBIA Service Corp., said many anticipated PACE to pass, but the last-minute decision could delay rates from some insurers.

“Right now everybody is scrambling to figure out what the end result is going to be and when that information will make it to the marketplace,” Vogel said.

Beyond the private market, PACE also threatens to put a damper on the state insurance exchange's sales of small-business “SHOP” plans in the open enrollment period that begins Nov. 1. SHOP plans covered approximately 1,350 members as of earlier this month.

“As a sales guy, [the expansion] would have opened a completely new bucket for me,” said John Carbone, SHOP sales manager. “It does throw a little wrench in everything.”

Carbone said he hopes Wade changes her mind about the expansion next year.

Precise impacts unknown

Leading up to Congress passing PACE, there were dire predictions about premium hikes for mid-sized employers that were going to be pushed into the small-group market.

Actuarial firm Oliver Wyman said in April that that nearly two-thirds of mid-sized employers would see premiums rise if the small-group expansion went forward.

Meantime, the American Academy of Actuaries predicted in August that the small-group expansion would cause some impacted mid-sized employers to self-insure, particularly companies with healthier workforces that are willing to shoulder more risk. That, in turn, would increase the risks within the small-group market because it would attract firms with less healthy workforces, potenitally increasing costs.

The National Association of Insurance Commissioners and insurance industry lobby America's Health Insurance Plans both said PACE offers states flexibility and will help avoid coverage disruptions and premium hikes.

Ken Lalime, CEO of Wallingford nonprofit insurer HealthyCT, said the delay won't have a big impact on his company, which has approximately 15,000 small-group members.

“I think it leaves some flexibility for small employers in the state,” Lalime said. “I feel like it kind of goes back to the status quo.”

Hartford insurer Aetna said on its website that PACE allows insurers to use underwriting and plan design that have the potential to lower plan prices.

In a statement about her decision to delay the expansion, state Insurance Commissioner Katharine Wade cited those employer worries.

“The Insurance Department has heard from employers, brokers and carriers on their concerns in expanding the small-group size from 50 to 100,” Wade said in a statement. “As a result of the newly enacted PACE Act, which garnered bipartisan support in Congress and was signed by the president, states now have the flexibility to keep small-group definition to 50 and under. After careful consideration and to be consistent with federal law, Connecticut is exercising that flexibility and is keeping the small-group definition at 50.”

Though Connecticut is expected to be in the majority of states that delay the small-group expansion, last year the state was in a minority that declined to allow mid-sized employers to renew their plans into 2017. PACE makes that option potentially permanent.

Earlier this year, Connecticut legislators changed state law to the expanded small-market definition, but included language allowing the commissioner to postpone the expansion if the federal government allowed it.

Despite her grumbles about timing, Gothers said the general reaction from her clients (largely companies with 200 and fewer employees) was a sigh of relief that they could be avoiding higher costs.

But like others, she said the impacts of the expansion were unpredictable, as are the impacts of the delay.

“I think the magic question was: Would this expanded definition be a good thing or a bad thing for clients?” she said. “I'm not willing to say it would have been completely bad and I'm not willing to say it would be completely good.”

Premium increases for small-group plans approved by the Insurance Department for 2016 were smaller than they were a year ago. The insurance department actually reduced many of the requested increases. Rates approved for small-group plans offered by Aetna, Connecticare, Harvard Pilgrim Health Care and HealthyCT, prior to PACE being passed by Congress, ranged from a 5 percent decrease to a 10 percent rate hike.

But Gothers said the impact of the expansion delay could reveal itself over the next several years, assuming it lasts that long.

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