As of January 2017, approximately 27,000 employers have active coverage through SHOP Marketplaces, covering nearly 230,000 individuals. These numbers fall significantly short of the Congressional Budget Office (CBO) estimate that 4 million people nationwide would enroll in coverage through the SHOP Marketplaces by 2017. According to a survey conducted by Mercer, many small employers are considering higher deductibles and correspondingly lower premiums.
In part one of this two-part interview, Anthem’s former President of Consumer Division and SVP of Commercial Segments, Jimmy Lee, offers his perspective on the small group market, and approaches health plans can adopt in order to better serve their small group lines of business.
SFTN: With FF-SHOP having shut down on 1/1/18 and the uncertainty in ACA, how will this impact the small group segment for health plans?
JL: According to Mercer’s survey, many small employers are considering higher deductibles and corresponding lower premiums. This cost shift to employees often comes through the form of health savings accounts (HSAs) to help employees pay medical expenses. The combination of a high deductible plan and a HSA is a consumer-driven health plan – it puts more accountability on the employee as to where and how health dollars are spent. Survey results show that 10% of employees in companies with between 10 and 50 workers will purchase consumer-driven health plans, while 20% and 37% will purchase these plans in the 50 to 199 employees and 200 to 499 employee segments, respectively. The number of small employers that are self-funded is 15%; much less than the 79% at large companies. However, this number is growing in small groups, with product offering level funded options down to 10 lives.
SFTN: Given the increase in level funded options, would you surmise this market segment will demand more attention from those carriers that have historically not been very active in the SG space?
JL: Small employers have a highly varying number of claims from one year to the next, given the small number health insurance lives. Therefore, the financial risk is high when self-funding claims in small group. Level funding products that provide more predictable monthly cash flow exposure, along with appropriate stop loss coverage for high claims, have made this offering more desirable. However, only 15% of smaller employers go this path. Carriers have taken their product offerings down to lower group sizes, but this would not be the catalyst to enter the small group market new, or in a more meaningful way, than they are today.
The 21st Century Cures Act will also now allow small employers to contribute ($4,950 for employee and $10,000 for family coverage) to health reimbursement accounts (HRAs) for payments of premiums or reimbursement for the purchase of qualified Individual plans.
SFTN: From a carrier’s point of view, how can they use this to better serve small employers?
JL: Carriers and brokers (more so brokers) need to apply this new dynamic to their small employer offerings. This could be a catalyst for more small employers to offer coverage. Brokers will need to understand this offering, because if they do not present this option, there are many [brokers] that will show them all options. Carriers also need to consider billing capabilities, such as list bill individual coverage to employers. In addition to this, Association Health Plans are currently being considered in Congress, and would allow small employers (as members of an Association) to pool their experience together and perhaps operate under different risk and rating rules. This has raised many concerns among carriers and associations, given the many selection dynamics and impacts.
SFTN: What are the concerns for carriers and associations, given the selection dynamics, and the impact of allowing Association Health Plans.
JL: Due to the fact that Association Health Plans are designed to set their rates based on experience, parts of the proposals for these plans would allow rating and benefits flexibility that is different from the ACA defined benefit portfolios. If these plans are allowed to rate for the health risk profile of each group, there will be significant anti-selection in the marketplace. Healthy small employers will not participate in the ACA plans but will join Association Plans with lower premiums on a benefit basis. This will drive up ACA rates. Association Plans can blow up quickly when their experience of a smaller pool of small employers gets worse, driving up premiums which are higher than other Association Plans and market products, and would result in a flight of healthier groups to different pools offered in the market.
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About Jimmy Lee
President, Consumer Division and SVP Commercial Segments, Anthem
Jimmy Lee is a dynamic healthcare visionary with a hunger for continuous healthcare ecosystem improvement. A senior executive at Anthem with P&L accountability of $35 billion of premium and 17 million members, directing thousands of employees with continuous Best in Class Associate Engagement Survey results as well as strategic business development and execution, while consistently exceeding goals and expectations. He has held progressively more accountable positions including President of Consumer Division, Senior Vice President of Individual, Small & Large Group, and SVP & GM of UniCare, Inc. Jimmy has led three very significant P&L turnarounds of UniCare and Anthem businesses, resulting in hundreds of millions of dollars in operating gain improvements. Jimmy led Anthem entering the Exchange Individual & Small Group ACA markets, including in-depth strategic analysis with subsequent strategic direction, investment priorities and decisions, and complex execution.
Jimmy is currently Strategic Executive with Sharecare, working with CEO and Executive team through strategic business decisions, including integrating various value propositions, go-to-market strategies, payer, provider, and consumer engagement approaches, and revenue generation proposals and projects. Managing Principal with Trexin Consulting.
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