Outlook Described As Grim For State's Small Group Insurance Market In 'Death Spiral'

HARTFORD, CT – State legislators and industry leaders gathered Monday morning to share information and brainstorm solutions to the state's small group health insurance market "death spiral" which has seen several insurers leave the marketplace over the last few years.

The event, titled "The State of the Fully Insured Small Group Market in Connecticut," was organized by the legislature's Insurance and Real Estate Committee and took place at the Legislative Office Building.

Earlier this year, both Aetna and Cigna chose to leave Connecticut's small group insurance market, bringing the number departed insurers to four.

J.P. Wieske, executive director of the Health Benefits Institute, gave an overview of the national small group insurance market, noting that the small group market has faced challenges nationwide dating back to changes made in the 1990s. He said enrollment in small group insurance plans, and the number of insurance companies offering them, has declined steadily, and the passage of the Affordable Care Act in 2010 has exacerbated the decline due to legislative and regulatory requirements.

According to Wieske, these problems play a significant role in the decline of small group insurance options in the state.

"The small group market has a unique set of problems," he said. "All the rules of the individual market with no subsidies apply, and this creates significant issues in this market. From the standpoint of Connecticut insurers, they face high medical costs, and as you know there are fewer and fewer insurers in this market, which indicates concerns about the risk."

Wieske noted that not all of the news about insurance in Connecticut is bad. Despite the state having the second highest medical costs in the country on a per-member, per-month basis, Connecticut's premiums are only the 5th highest nationally, which Wieske credited to good care management. According to America's Health Rankings, Connecticut is ranked 4th in overall health, with a low premature death rate, low prevalence of non-medical drug use, and a high adult flu vaccination rate.

On the insurer's side, representatives of insurance companies that have both decided to stay in the small group market and chose to leave it spoke about the challenges of keeping the market viable.

Lou Gianquinto, president of Anthem Blue Cross and Blue Shield, assured legislators that the company was committed to the small group insurance space, but outlined issues the market is facing.

"It is a shrinking market, as we talked about, and that creates a few problems from the aspect of trying to re-establish the needs of our clients in the small group space, as well as how we re-evaluate our risk on a year over year basis as we have a shrinking number of potential small group members," Gianquinto said. "Affordability is another problem. How can we bring an affordable product to our clients in the small group space?"

Gianquinto continued, suggesting that new treatments – such as gene therapies that the FDA is in the process of evaluating and approving – would drive up costs as they offer real benefits to consumers but are very expensive. He also said that government mandates drive up costs as well, and whether those mandates are necessary or not, their impact on cost is a "reality."

Zach Moon, the actuarial director for Cigna, discussed the insurer's rationale for exiting the small group insurance market.

"We've been proud to serve Connecticut and its families over the last three years, but over that time we have consistently seen losses in that space, and do not see a consistent future to eventually break even," Moon said. "We've consistently seen increases in the small group market in Connecticut, in both unit costs and utilization and mix over the last couple of years, especially following the global pandemic in 2020."

Moon explained that while the cost of care fell during the pandemic, as people began to feel a sense of normalcy return in 2021 and 2022, their utilization of services led to a cost increase that was challenging to keep down. He also referenced the costs of gene therapies and new drugs that have driven up costs, such as Ozempic, which has seen a large increase in usage.

Sen. Matt Lesser, D-Middletown, expressed his frustration about the apparent lack of solutions for the problems facing Connecticut's small group insurance market.

"There's been a lot of talk this morning about the ACA, which is national legislation that applies in all 50 states, but the current death spiral in Connecticut is really specific," he said. "I think one of the frustrations of this conversation is that while there has been some talk about Connecticut's specific situation, there's been not enough about what other states are doing, and what has worked and what isn't working, because I don't believe that the death spiral in the small group market is is a national situation."

Lesser offered several potential approaches to help sustain the small group market, including combining the small group and individual markets, offering more state based subsidies and improving consumer protections for companies who buy into the small group market.