Expert: Changes needed in small group health insurance market

Connecticut's small-group health insurance market, with its typically lower premiums, is facing "choppy waters," said Sabrina Corlette, professor and co-director of the Center on Health Insurance Reforms at Georgetown University during a presentation to the state Commission on Racial Equity in Public Health Thursday morning.

Small-group health insurance is medical insurance purchased by businesses with 50 or fewer full-time employees to provide health coverage. Corlette explained that enrollment in small group insurance has decreased by over 160,000 people from 2011 to 2021 and continues to decrease. At the same time, premiums and claims have increased. Corlette explained that the claims and premiums reflect to some degree the overall health of the risk pool, noting that rising costs typically reflect a sicker population.

"This trend line here suggests that either the morbidity is getting worse, the prices are getting more expensive, or some combination of both," she said.

However, several policy recommendations could help stabilize the small group market and lower costs in Connecticut, Corlette said, noting that some have already been implemented in other states.

Corlette said she assesses the insurance market based on trends with the number of employers offering health insurance and premiums compared to the growth of health care costs over time. She also examines the risk pool, a form of risk management that assesses individuals whose medical costs are combined to calculate premiums. Typically, the sicker a group, the higher the premium.

The two major problems with the Connecticut small group market relate to the risk pool and the rising cost of the commercial market.

Regarding the risk pool, Corlette explained that with the Affordable Care Act, everyone pays the same regardless of the risk. However, she said that in Connecticut, companies had found a workaround so "everybody gets their own pool" with level-funded and health-associated plans.

If an employer uses a level-funded plan, there is an underwriting process in which insurance companies assess the risk factors of an employer's group and then set the premium based on the assessment. Corlette said this allows everybody to get their premium based on potential risks they pose to the insurance company.

However, level-funded plans come with stop-loss insurance, a form of reinsurance where the insurance company offers to pay claims above a certain attachment point.

"The pros of these level-funded plans is that they are effectively underwritten, so each small employer group is assessed based on its health status, and you get a lower premium if you have a healthy younger group," Corlette said. "The cons here are that if you are in the fully insured (Affordable Care Act) regulated market, you pay higher premiums and if you're a less healthy older group, you pay higher premiums."

The other workaround is associated health plans in which an association offers health benefits to multiple employers for individuals. This also follows the underwriting process and has similar pros and cons.

Policy recommendations that could help reduce costs included rate setting or reference pricing which would allow the state to set the price for services and cap reimbursement at a percentage of Medicare and Medicaid. Also cited was a public option that lets small employers purchase state-sponsored public plans, as well as an option allowing small business employees to buy into Medicaid or the state employee plan.

Lastly, an enhanced rate review could help empower insurance regulators to require a reduction in provider reimbursement or compliance with a cost-growth benchmark during a review of proposed premiums, Corlette said.

She added that some states have prohibited the sale of stop-loss insurance to small employers or passed policies that make them "less attractive." Another option is to set up a risk-shifting program where an insurance company or stop-loss insurers taking all the "healthy groups" must pay a fee to compensate the insurers with sicker groups.

"What's happening with these level-funded plans is the companies are essentially using a regulatory loophole to get around the Affordable Care Act," Corlette said. "So the state of Connecticut could prohibit these stop-loss insurance companies from asking questions about health status, that would pretty much mean they would just stop selling because they would take away the business case for offering these products if they can no longer do what we call underwriting."

History

The state General Assembly declared racism a public health crisis after George Floyd was killed by police and the COVID-19 emergency highlighted health disparities in communities of color. It established the Commission on Racial Equity in Public Health in 2021 to provide policy and system change recommendations based on data collection, policy analysis and collaborations with stakeholders, such as community members and state agencies, according to its website.

Board members include experts from various fields relating to health, such as economic research, violence intervention, racial equity, community engagement and environmental impact. The current executive director for the commission is Pareesa Charmchi Goodwin and it is chaired by Ayesha Clarke, executive director of Health Equity Solutions.

The commission's work is based mainly on data gathering, spreading public awareness of racial inequity issues, and creating policy recommendations.

For example, the commission released a study in 2023 that analyzed racial inequity in healthcare through data collected from state agencies, the Census Bureau and the Centers for Disease Control and Prevention. The data highlighted the various ways communities of color are negatively impacted by social determinants, such as housing and food insecurity, at higher rates, which worsens health outcomes. The commission then collaborated with Hartford-based artist Lindaluz Carrillo to create a series of educational posters based on the data points.