Time to regroup? Small business health insurance faring better than individual market
In the eyes of one expert, Minnesota’s individual health insurance market is in a “death spiral.” But group plans for businesses are far from a flatline.
“We find individual coverage is going to be more expensive and in many cases more limited than what you can get for group coverage,”
said David Martin, insurance practice group leader for Associated Benefits and Risk Consulting in Minnetonka.
While much attention has been given to next year’s individual premium spikes, small-business owners and employees could be paying less for insurance by switching to group plans as open enrollment continues through the end of January.
That’s a swing in the pendulum from several years ago.
“We had a number of groups disband in favor of individual coverage because it was so much less expensive,” Martin said. “Many of the small groups using individual plans as a replacement are considering rebanding as a group to get the advantages that come through,” such as tax credits and provider flexibility, not to mention cost.
Compared to the 50 to 67 percent premium increases hitting individual plans in Minnesota, increases for small group plans are ranging from a 15 percent increase to a 1 percent decrease.
“Rates have actually stabilized in the small group market,” said Geri Sanchez Aglipay with advocacy group Small Business Majority. “There’s no signs that group plans are going to drop out. It’s given (insurers) a greater level of certainty than before.”
Small group plans are for businesses with fewer than 50 employees — firms that aren’t required by the Affordable Care Act to provide coverage. Many do, however, whether to compete for employees or to satisfy the ACA mandate that everyone have coverage.
State health insurance exchange MNsure reported small-business coverage has tripled in the past year — contributing, as Martin said, to the individual market’s death spiral and stability in group plans.
There is still much that could change, according to promises made by the incoming presidential administration. And no one policy is right for every business or individual. But as insurance markets get sorted out in the era of Obamacare, business owners are faced with choices that could end up benefiting or hurting themselves and their employees.
At Duluth’s Benes Insurance Services, Stephen Collins is fielding more questions than usual from business owners interested in renewing group coverage or getting out of the volatile individual market.
The No. 1 question they ask, of course: “How much is it going to cost?”
“The motivation behind it is wide and varied, but the biggest single driver behind all this is the cost,” Collins said. “Is it going to cost me more to do a group than individual insurance? Sometimes yes, sometimes no.”
He gave an example of a 55-year-old small-business owner who might pay $800 a month for insurance on the individual market, but getting group coverage would shave $300 off of his personal premium. Tax credits could then help with the additional costs borne by his business, which must pay at least half of employees’ premiums for plans purchased through MNsure.
“If you can save $3,600 a year on your premiums, that’s not a bad deal while keeping the same basic benefits,” Collins said.
The cost of the plan also needs to be weighed against the benefits of the coverage.
“There’s a lot of other things beyond costs that are more limiting in the individual market that makes the group market more appealing,” said Alycia Riedl, a vice president for brokerage Willis Towers Watson in Minneapolis.
She said that providers and network coverage are a big difference between the markets — individual plans often cover a limited region and wouldn’t be a wise choice for frequent travelers or those who spend winters in warmer climes.
“That’s a significant change from before the Affordable Care Act,” Riedl said.
Plus, small businesses don’t have market caps on group coverage like in the individual market.
All of this means employers who had been dropping coverage because “it was hurting employees” or those with a healthy workforce that didn’t consider it before are all starting to ring up brokers or visit MNsure.org — “regrouping,” as it’s called.
A more diverse base helps stability, as does the fact the group market is much older.
“I think we’ll see less volatility,” Riedl said, but added that stability doesn’t always equate to savings, and where there are savings they could be small. Every case is different, after all.
“What may work for you may not work for me,” Collins said.
The state Department of Commerce says about 5 percent of Minnesotans get insurance through the individual market and another 5 percent are on small-group plans — together that’s more than half a million people.
For the millions of others not covered by those plans or Medicare or Medicaid, employer coverage is provided by big-group plans (18 percent) or self-insuring (33 percent). And some think the latter is where the market needs to move.
“The reason why you see premiums go up and become unaffordable in many situations is because there is no focus on lowering the actual cost of the services,” said Adam Russo, CEO of Phia Group consultancy outside of Boston. “People actually spend more time researching the television they’re going to buy then the hospital they deliver their children in.”
Russo argues that companies that self-insure can control costs by incentivizing economical health care choices — with cash.
“If you choose this hospital, we give them 20 percent of the savings as cash, and diapers and wipes free for a year. By doing that we’re saving roughly $15,000 per baby,” he said. “Unless you’re self-insured you can’t do these things.”
For the country’s largest employers, not self-insuring is the exception to the rule.
In Duluth, Minnesota Power’s parent company, Allete, has long self-insured and has made long-term plans based on the Affordable Care Act.
“Our strategy is based on offering a health plan that balances the employee and employer affordability, while supporting healthy participants that are engaged in health care decisions,” spokeswoman Amy Rutledge said.
Allete has more than 1,500 employees and so is able to spread risk far and wide. For smaller businesses, there may still be an opportunity to self-insure.
“It’s less about the size and more about the type of employees and type of behaviors you have,” Russo said, saying a small yoga studio might be a better fit for self-insuring than a large employer with lots of drinkers and smokers to cover.
For any enterprise there is no one-size-fits-all when it comes to health insurance, something that keeps firms like Russo’s in business. And for all anyone knows, everything is about to change again.
The unknown future
When open enrollment comes around next year, there might not be many drastic changes. It takes time to unwind billions of dollars of investment and years of regulations even if the Affordable Care Act is completely scrapped. Plus, insurers need to submit plans to regulators by the summer.
But come 2018, if President-elect Donald Trump and Republicans in Congress deliver on a promise to repeal or at least alter the ACA, something will change. It’s just impossible right now to say what.
“We’re going to see some pretty significant changes in health care, taxes, what’s’ required of employee benefits — I don’t think anyone’s able to predict that,” said Riedl, the vice president with Willis Towers Watson.
Anything is possible, whether it’s a cancellation of the so-called Cadillac tax, tax deductions for individual plans or requiring continuous coverage to qualify with pre-existing conditions.
Whether any of the changes will help or hurt individual or group coverage is impossible to say, since no concrete proposals will be considered until January.
In the meantime, Riedl said top industry officials are calling the insurance market a crisis, and the state needs to step in somehow.
“What you’ll probably see is more states try to stabilize it with less federal help,” Riedl said. “There will be a lot of action at the state level trying to pick up the pieces.”
With split government at the state level there’s also no telling what might get done.
Collins, at Benes Insurance in Duluth, said he couldn’t predict what changes might be in store — if he could make such predictions, he joked, he wouldn’t be selling insurance. But he offered some optimism on the eve of another disruption in the industry.
“We can just hope for the best.”