ACA lures individuals; small group market shrinks

Once upon a time, we were all watching the same TV shows at the same time. Once upon a time, there was just one telephone company. And once upon a time, most of us had roughly the same kind of workplace-based group health insurance.

The latter is still true, but the kind of coverage provided is changing, especially among smaller employers, and those changes have accelerated in New Hampshire. It could accelerate even more in the future, with new products that allow employers to provide insurance by giving their workers tax-free money to pay premiums or to go out and buy their own individual policies.

The small group market has been shrinking, pulled in different directions, and the individual market is growing as it becomes a more affordable alternative.

It has gotten to the point where the New Hampshire Insurance Department late last month sponsored a panel discussion on what to do about it during its annual healthcare market forum.

“We need to do whatever we have to do to prevent shrinking of the small group market pool, because the last thing we want to see is reaching the point where small employers can’t get coverage because the premiums are too high,” said Kathryn Skouteris, New Hampshire market vice president for Harvard Pilgrim Health Care.

Ray White, a Bedford broker who handles individual insurance, has noticed the shift too. “I hear from those mainly doing groups, ‘I’m going to lose 10 percent. I’m starting to get scared,’” he said. “There is a seismic shift going on.”

Despite this, workplace insurance is still where it’s at. Some 57 percent of New Hampshire employees are covered through the workplace. More than half of that market is self-insured and another fifth is in the large group (more than 50 employees) category. So those two categories represent 70 percent of the commercial market, since large businesses tend to have more workers and are more likely to offer insurance — indeed, they are required to by the Affordable Care Act.

On the other hand, New Hampshire’s business landscape is overwhelmingly small. Only 2,000 of 42,000 businesses have more than 50 employees, which is less than 5 percent. Those small businesses have always struggled to offer their employees healthcare, and that struggle has only intensified.

This is partly because of Covid, which untethered so many employees from their workplaces and led to increased subsidies and extended open-enrollment periods on the ACA insurance exchange. In October, there were 48,000 Granite Staters taking part in the ACA exchange, some 10,000 (or 21 percent) more than October 2019, before the pandemic began.

There was also a 24 percent increase in non-subsidized individual insurance, thanks to state reform, which used a self-insurance waiver to lower premiums by about 14 percent of what they would have been.

Rising deductibles

But the small group market has been declining for years, shedding 10,000 individuals over the last five years to 63,000, just 8,000 more than those with individual coverage.

Large and self-insured companies lost 12,000 members over three years, but that has a smaller impact since they have so many more members.

One reason is premiums. In 2018, individual policies on the whole cost over $80 more a month than small group policies, but the cost of individual premiums went down by 12 percent, to $526 a month per individual, while small group prices went up by nearly 7 percent, to $530.

But members of small groups paid for 19.4 percent of their healthcare costs in 2020, lower than the 24.7 percent paid by unsubsidized individual plan holders. But most people on individual plans do get subsidies, and they only pay 12.3 percent of costs.

And subsidies are increasing. They used to end when a family’s income was 400 percent of the poverty level, or $106,000 for a family of four. But now there will be some form of subsidy even beyond that.

“Joe Biden has just been throwing buckets of money at the individual market,” White said.

He talked about one client who made $350,000 and was paying only $8 a month for the rest of 2021 because he collected one week of unemployment. “It’s going up to $900 a month on Jan. 1, but that is crazy.”

Meanwhile, White said group rates are rising next year, though he said that the increase will be in the single digits, and that it’s in keeping with inflation and relatively stable.

The Insurance Department would not provide aggregate group rates for this year, let alone next, in stead pointing to the website of the National Association of Insurance Commissioners. The site reveals a myriad of filings, but a look at a few indicate prices are going up.

For instance, Anthem’s filing for the last quarter of 2020 for small group preferred-provider organizations indicates a 7.9 percent increase, and the small group HMO filing shows an 8.1 percent increase. Harvard Pilgrim filing for HMO small groups for the last quarter of this year proposes rates go up 3.7 percent.

None of the three major insurers in the group market would reveal their rates filed for next year before NH Business Review’s deadline, though some were happy to talk about new products offered.

Skouteris of Harvard Pilgrim — which, with 42 percent of the state’s market in 2020, was the largest small group insurer — said the company is now offering a lower-cost virtual care product, where a primary-care physician does your checkup remotely, sending you a packet to take your own temperature and blood pressure, with live visits by referral.

“It’s less costly than a regular plan. It takes some pressure off of the healthcare system and it’s a good option for employers and employees,” said Skouteris.

United HealthCare — which took over the Tufts Health Freedom Plans at the beginning of the year as part of the merger of Tufts and Harvard Pilgrim — will be offering out-of-state primary-care provisions for those who travel a lot or for those who have employees based out of state.

United had only 1 percent of the small group market in 2020, but if they hang on to Tufts’ 19 percent share during this renewal period, they’ll be a major player in New Hampshire. Unlike Anthem and Harvard Pilgrim, United doesn’t insure individuals.

Anthem has slipped behind Harvard Pilgrim in the small group market, now with a 38 percent share of the market. They didn’t return calls about their rates and offerings.

Cost-competitive

Nevertheless, small group rates in New Hampshire, at least in 2020, were lower than the U.S. and New England average (whereas the large group single premium was higher than both).

However, there are the deductibles. The small group’s deductible average in New Hampshire hovered between $3,000 and $3,500 from 2016 to 2020 — the highest in New England, except for Maine. The large group deductible amount was about $1,000 less, though still the highest in New England in 2020, and 19 percent higher than the national average in that year.

The differences between rates and costs is crucial, said Lucy Hodder, director of health law and policy programs at the University of New Hampshire Franklin Pierce School of Law. “What you are seeing is a lot of people who end up paying for care out of their pockets,” she said.

Premiums may be stable, “but the deductibles are just incredibly high,” and many of the efforts to lower costs through innovative practices went out the window during Covid, she said. “There are only so many ways you can tinker with the risk pool if costs just keep on rising every year.”

The individual market is not only becoming more cost-competitive, but it is easier to access. The Trump administration tried to starve the Affordable Care Act by narrowing the open-enrollment window and cutting off funding for navigators. Biden, however, is doing the opposite. In addition to setting a fatter sign-up window — from Nov. 1 to Jan. 15 — earlier this year, he allowed an additional special enrollment period from Feb. 15 to July 31. And navigators are back in business.

Health Market Connect, one of two navigator organizations in the state, is getting $1 million a year for the next three years, and has hired 10 people. More than half speak other languages, mainly Spanish, indicating the outreach target: lowerincome and minority individuals. But it is also reaching out to the over-26 crowd that has just aged out of their parents’ coverage and small business owners via the major chambers of commerce, said Elias Ashooh, project director.

More changes to come

According to White, in the future the single thing that could “open up the floodgates” in moving groups to individual coverage would be the businesses themselves via two programs: Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs).

Both allow employers to use Health Reimbursement Account funds — pretax money that reimburses employees for medical coverage for what their group plans don’t cover — so those workers can buy their own individual coverage instead of offering group insurance at all.

QSEHRAs have been around since 2017, but they only apply to small groups and are capped, so they fall short of premium cost. They do allow workers to purchase subsidized coverage on the exchange, minus the amount the employer is contributing.

ICHRAs started in 2019 for large employers as an alternative to their ACA requirement to provide health insurance, but they spread to all employers the following year. They have no caps. Not only can the employer and employee use pretax dollars to pay fully for individual premiums, but the company can also offer to pay for medical expenses that those plans don’t cover, like deductibles. The big drawback is that these individual plans can’t be subsidized.

So far, the arrangement has been slow to catch on, especially in New Hampshire. Regulations are complex, and the companies that are rolling them out are just getting them off the ground. White is seeing a lot of interest, but so far, not one company has made the switch, he said.

“We don’t see small employers dumping coverage to purchase ICHRA,” said Maria Proulx, regional vice president of sales at Anthem/Matthew Thornton, at the October healthcare forum.

But Insurance Commissioner Chris Nicolopoulos said that it’s probably too early to tell.

“We do not yet have a firm sense as to how many businesses are taking advantage of the new versions of HRAs. Those approaches and products are in their infancy, and we will be following their development closely to gauge their impacts on the small group market,” he told NH Business Review. “ICHRAs provide an advantage that may appeal to some employers.”

White puts it more bluntly. “If they could get out of” offering insurance “to be competitive, they will. They don’t buy benefits because they are Santa Claus,” he said.

“There are other alternatives that are attracting people away from workplace coverage,” said Steve Gerlach, a healthcare attorney with Bernstein Shur. There are association health plans that allow small groups in different industries to pool their resources, essentially pushing them up to the large market. There are direct-pay arrangements, giving providers a monthly fee that allows consumers to see them when they want. There are share-care arrangements, when a group simply agrees to pay the medical costs of its members, again by accessing a regular fee. This used to be a religious alternative, but now it’s becoming secular.

Is all this fragmenting the group market? “Another way to phrase it is diversity,” said Gerlach. “As long as the cost of group insurance is high, we are going to have people trying to solve that problem by exploring alternatives.”

If individual rather than group coverage becomes the norm, it could have enormous implications. Even now, the shift to individual coverage might be a contributing factor to the so-called “Great Resignation.”

“If individual coverage gets more accessible and affordable, it frees people from their shackles. There is no longer, ‘I have to work this job because I get benefits,’” said White.

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The small group market has been declining for years, shedding 10,000 individuals over the last five years to 63,000.