What Are Some Major Health Insurance Trends Affecting Large Groups?
Rick Coburn, CAHU President:
To a great extent, the major trends for large groups mirror the trends for small groups. An aging population with increased medical needs is one factor that influences the trend of rising health care expenses. This has moderated somewhat in the past few years. But, to a substantial extent, the proliferation of expensive specialty drugs is driving the upward pressure on costs. This trend may accelerate as more effective, but costly, treatments are introduced. Another trend is the expansion of consumer driven health solutions as employers search for ways to mitigate rising premiums. These include voluntary plans that cover the higher deductibles and coinsurance to which employers are increasingly migrating, telemedicine programs to enable employees to connect quickly to medical professionals in non-emergency situations, and technology tools for tracking personal health. A third trend is the application of technology to the insurance industry, including online enrollment, and tools for employees to evaluate plan options.
Tony Lee, CEO of Dickerson Employee Benefits:
We are seeing more industries pooling their resources and forming programs that potentially keep large-group rating in place. The Southern California Employee Benefits Program for Charter Schools is an example of one such program that allows small charter schools to benefit from the composite rating traditionally reserved for larger groups.
David L. Fear, Sr., Shepler & Fear General Agency:
Large groups are facing two major issues: First, the rising cost of health care services, especially for prescription drugs, has affected large employer plans, especially those that are self-funded. For this reason, we are seeing movement from traditional PPO arrangements to a Medicare based pricing program using third-party entities to negotiate with providers to pay a percentage of Medicare for their claim costs. The key seems to be how much a provider will accept as payment in full and agree not to balance bill the patient. Larger employers who self-fund their medical benefits realize the savings through these kind of pricing schemes, which that has a direct effect on the cost of their benefit plan. Second, there is increased complexity of offering private coverage due to regulatory requirements enacted at the federal level. Regulators under the Dept. of Labor and the Dept. of Treasury, including the IRS, are auditing large employer plans to enforce compliance with Federal laws, such as the ACA, COBRA, HIPAA, FMLA, etc. Many large employers are clearly frustrated by the increased rules and regulations. Yet, the government has done nothing to reduce the cost of health care services so that employers, of all sizes, continue to pay more and more for “fringe” benefits. Clearly something is wrong. Some very large employers are looking at the bottom line cost and questioning if it’s less expensive to pay the non-compliance fines. Can you blame them?
Kevin Timone, Chief Sales Officer, CHOICE Administrators:
The most obvious issue these groups will experience is the difference in price and rating methodology. The transition from traditional composite rates, to a community/ age rated structure, will take some time for mid-market employers to adapt to and accept. Employers will have to find a strategy that minimizes the premium shock employees are having, and yet still meets the company’s health care budget objectives. While large groups have traditionally enjoyed a certain level of customization and negotiation, that is no longer available as they move. However, many groups will now have the opportunity to offer more options to employees in the small group market.
Rob Carnaroli, Vice President of Sales for Sutter Health Plus:
We’re likely to see more employers shift costs to employees by selecting high-deductible health plan (HDHP) designs. For employers who already made this move, we’ll see increases in plan deductibles, out-of-pocket costs, copays and coinsurance. On the administrative side, more companies are exploring online enrollment vendors to trim human resources expenses. Employers also want simplified connectivity with carriers to exchange electronic data securely and reduce or eliminate paper forms.
Marc McGinnis, Vice President of Sales, Word & Brown General Agency:
1. Medication utilization is driving costs. Carriers assess renewal increases on medical and prescription utilization. Medical utilization has remained consistently low, but prescription utilization has increased. High prescription prices and utilization have contributed heavily to group renewals.
2. Overall group increases in the 100+ market have been low. The major increases were seen last year because of ACA, the mandate and affordability. Adjusting employer contributions to adhere to the affordability guidelines in 2014 resulted in larger increases in 2015 as carrier braced for uncertainty.
3. Renewals YTD for groups 100+ have been modest
4. Groups that are 101+ FTE with less than 100 benefit eligible employees are having difficulty being written. They are caught between two markets (small and large group) due to FTE counts. A small group carrier may decline to write the group if they have too many FTEs (bringing them to 101+) while a large group carrier will not quote them since they do not have over 101+ benefit eligible employees listed on the census.
5. The small group market is now defined as 1-100. A group can be written in the small group market because they have 85 eligible employees, but considered applicable large employers (ALEs) by federal law definition (50+ FT and FTE). This is causing much confusion with regard to the employer mandate/penalties. Groups with 50+ FT and FTE are subject to the employer mandate even though they are written under a small group plan.
6. Even though small and large group should both be guaranteed issue, large groups are still being declined. The carrier loophole has been, “We are noncompetitive and will not be releasing a proposal.”
7. Some industries are loaded or auto declined due to uncompetitive rates.
8. Certain carriers will not quote virgin groups as they are considering participation heavily when vetting their prospects.
9. The rising cost of doing business for employers and carriers has resulted in a reduction of work force.
10. Some employers have considered reducing their workforce to avoid ACA penalties.
11. Minimum wage went up July 2016 – additional cost to employers.
12. An aging population impacts utilization.
13. New technologies, while increasing effectiveness in some areas, are driving up costs in other areas.
14. Pharmacy costs: This is a big one; new specialty drugs are beyond expensive when they are under patent. This happens when a pharmaceutical company’s exclusive patent with the FDA expires (usually 7-10 years) and a generic is made available. Once a generic equivalent becomes available, a new drug is already in production; cyclical. Last year the pharmaceutical companies lost an estimated 32 billion in global sales because of drugs coming off their patent. It’s a domino effect: the pharmaceutical companies have to raise prices to recoup the losses, passing rate increases down to the carriers/ members.
What Issues Are Brokers Facing With Larger Groups Transitioning Into The Small-Group Market? Rob Carnaroli, Sutter Health Plus:
The most dramatic change is how premiums are calculated. Premiums for small groups are age rated and this may cause some sticker shock to these groups. In addition, small group employers face a unique set of complicated rules due to the Affordable Care Act. Employers expect their brokers to be experts on the ACA and all the other ever-changing regulations. They demand a higher level of competency and knowledge. Rick Coburn, CAHU: With the exception of grandfathered groups, groups in the 50 to 99 range will fall into the ACA range of small groups (two to 99) by the end of this year. There are several issues employer and employees will face, and health insurance professionals will be ready to provide expert advice and service. Among these issues will be moving from composite rates to an individual age based rating system for employees and dependents.
The impact on premiums will differ depending on the demographics of each company, but generally this rating change has pushed premiums higher. Another issue is recognizing that carrier service will change to a less personalized mode, with carriers requiring electronic interface for many service issues. Other issues include fewer choices for employers and employees. Some examples are fewer self-funded options, wellness programs, and medical plan choices, as well as some differences in network availability. Small group employers will lose their ability to negotiate premium rates. Underwriting rules will differ, but an advantage in the small group area is the availability of more relaxed participation rules. Another advantage will be the ability to access comprehensive private exchanges. Members of the California Association of Health Underwriters will be actively assisting employers with this complicated transition, offering professional, experienced assistance.
David L. Fear, Sr., Shepler & Fear:
Challenges include going to a member-level rating system compared to composite rates; losing their “risk adjustment factor” and having to purchase a community rated product; having less flexibility in plan designs (strictly complying with ACA small employer metal plan features); losing alternative funding options (SB-161 limits stop-loss insurance products for small employers); and having restrictions on HRA/ FSA programs, which are still enforced by some carriers in the small group market. Also, the small group market does not seem to have as many electronic enrollment options as have been available to large employers (although that is changing).
There are a number of workarounds for each one of these six challenges. As time passes, employers will certainly be able to implement (or re-implement) many of these features, but they are still a short term challenge that most employers were not expecting when the ACA first became law.
Kevin Timone, Chief Sales Officer, CHOICE Administrators:
Brokers face several challenges with the transition. The largest, perhaps, is the amount of education their mid-market clients will need as they move into the small group market. There is tremendous pressure to make sure their clients understand all the complexities the ACA brings to the market, including the difference between composite and age-based rates. Other topics that should be addressed are ACA metal tiers and how they work as well as compliance (IRS Forms 1094 and 1095). More than ever, brokers should work closely with partners that offer sales and enrollment support and take advantage of innovative technology tools that streamline the sales and enrollment process.
Tony Lee, Dickerson Employee Benefits:
Groups transitioning from large group to small group have had a major impact on the renewal process as well as on how changes are communicated to the client. The financial impact of going to age banded rates cannot be understated. We’ve seen premium swings in both directions depending on the demographic makeup of the group. Some groups have always had tiered rating and unless the concept of agerating was communicated very early in the process, brokers run the risk of losing long-term clients. Dickerson always advises our broker clients to take their clients through the different scenarios long before renewal so that there is no surprise and contingency plans can be made.
Marc McGinnis, Word & Brown General Agency:
1. Rates! Most groups (51-99) are seeing 20% to 40% rate increases in addition to watered down benefits by transitioning into small group. This is a difficult conversation to have with employers. Account based plans, such as HSAs, HRAs, and FSAs, can be a great strategy to help employers offset the cost increases being passed along to participants.
2. Some groups in the 51+ market had benefit administration systems and some of those systems can no longer support age-rated plans so alternate systems have to be used.
3. There has been additional burden placed on the group administrator because of small group plans and rates complexity.
4. ACA compliant plans have large OOPs, higher copays, and deductibles.
5. SHOP (aka Covered California for Small Businesses) is losing carriers (the individual exchange as well). There are less choices available and less competition due to carrier financial losses in the exchanges
6. Large groups are losing their composite rates and seeing higher costs to the EE due to member level rating.
7. There is the network versus cost issue. Of course, we can’t call out any carriers by name. The 51-100 segment will be facing sticker shock as they enter the SBM world of rating and rules. The 51-100 groups with previously excellent experience will face higher premiums. The 51-100 groups with less than stellar experience may actually see savings as they enter the GI small group rating world, but all 51-100 groups will see a dramatic improvement in the choices and flexibility suddenly available to them through either the state-SHOP exchange, or the private California Choice exchange — each with employee choice of multiple plans and a wide range of network options all within the same group with simplified, integrated enrollment and administration.
What are the most effective ways to sell to large groups? Kevin Timone, CHOICE Administrators:
As always, budget-based approaches are effective when working with an employer who is transitioning out of mid-market and into small group. Today’s employers want to get the most value for their dollar while giving their employees more control over their benefits. This approach helps explain why multi-carrier exchanges have seen significant growth. They allow employers to establish their budgets while providing employees broad access to find their doctors at a cost and benefit level they choose.
Rick Coburn, CAHU:
Selling to large groups revolves around the wider needs of large group employers. An effective sales approach recognizes the longer lead times involved in large group and starts with gathering comprehensive benefit and demographic data, and claims data where available. It also includes a conversation with human resources about why they are considering a change, their needs regarding benefits, including compliance issues such as large group penalties, technology to simplify and connect benefit processes, and other aspects of human resources that touch benefits, and a further conversation regarding risk tolerance to determine if the employer is a candidate for forms of self-insurance. An agent needs to be well versed in technology tools, and have good knowledge of the differences in carrier benefits and administrative options.
Tony Lee, Dickerson Employee Benefits:
Many successful agents are rebranding themselves as business consultants offering total solutions that affect the client’s bottom line in a more direct way. In addition, more agents are structuring their businesses to consult on specific products and/or industries. They are making effective use of technology, including marketing automation and social media, which helps them focus on personalized, targeted messaging. Channels, such as blogging and online video marketing, provide platforms for agents to share their expertise and position themselves as sought –after authoritative resources in specific business sectors. This, in turn, leads to more qualified referrals from business leaders seeking consultants who truly understand their industries and the challenges they face.
David L. Fear, Sr., Shepler & Fear:
Most large employers use the services of consultants or very sophisticated brokers to address short-term and longterm term trends. Successful agents should prepare to provide more of a consultative approach to how they work with large employers. Since a high percentage of large employers self-fund their health care benefits, producers must understand stop loss insurers, third party administrators, and a host of plan design issues including consumer directed, wellness, and flexible benefit programs. Demonstrating knowledge is not enough to gain a large employer’s business. Successful producers have a strong background in the regulatory area (both state and federal) and are very versed in human resource issues. What worked 10 years ago is not enough to gain their business today. A producer must be one step ahead. The consultative approach takes a great deal of fact finding, survey reviews, and an understanding of the employer’s short and long term employee benefit objectives. Don’t assume that there is one simple answer to their challenges. Clearly identify each employer’s concerns and challenges, and then develop a game plan that will result in their buy-in.
Rob Carnaroli, Sutter Health Plus:
To be successful, carriers will need to keep pace with market demands. As HDHPs become more popular, consumers want robust transparency tools to understand the underlying costs of health care. Carriers that can deliver these tools and other convenient, online solutions will be attractive options to large groups that are shopping for coverage.
Marc McGinnis, Word & Brown General Agency:
1. Provide additional options, such as trusts that only certain brokers have access to.
2. Present alternate carrier options, such as broker-friendly PEOs, self-funding, medical-bridge plans.
3. Present trusts all brokers have access to, such as ACEC.
4. Tweak plan benefits in a way in which it saves the group money without impacting the plans overall. For example adding higher prescription deductibles etc.
5. Assist with compliance resources; compliance is at the center of everything we do in healthcare (ERISA, Section 125, COBRA, ACA, HIPAA)
6. Ask what is the group’s story. What are their pain points and needs as well as their network, their pharmacy, and their costs?
7. Work closely with your GA rep or carrier rep; they are the local experts.
8. Some large groups are adding crossborder healthcare to their health benefit offering to support their Spanish-speaking employees and as a cost-saving strategy. Some brokers are leading with cross-border as a strategy to counter continued premium inflation of the traditional U.S. carriers and show added value to their clients.
9. The employer saves when the employees select lower cost options.
10. Choices! Know your carrier options: a. Certain carriers have been very successful with their HMO deductible products lately as employers are looking to save on premium costs while not compromising the network size or flat copays for doctor’s visits, urgent care, pharmacy, etc. b. Eighty-five percent of Health Net’s groups are buying Enhanced Choice where a large group can choose up to six plans (similar to popular Choice models in the market) – with defined contribution. They are also finding success with their HSA plans since integrating with Health Equity. Most groups are offering multiple HMO network. Health Net is working on a 51-100 benefit eligible but 101+ FTE product – no one else has this – for groups caught between the two markets. More to follow on this as HN finalizes their product. Source Link