Exactly what the health insurance market will eventually look like under health reform is still anyone's guess. However, here are three trends that could indicate how the system will shake out:
1. Smaller companies self-insure. Large companies with more than 5,000 employees are a common feature of the self-funded health plan market. However, small and mid-size firms across the country are increasingly turning to self-insurance to reduce healthcare costs, reports CFO.com.
In fact, the percentage of employers with fewer than 1,000 plan members that self-insure has grown from 29 percent in 2008 to 48 percent in 2010, according to PricewaterhouseCoopers (PwC). "The reality is that companies with below 1,000 lives do experience more fluctuation [in cost] than [larger] ones," Michael Thompson, a principal in PwC's human-resource services group, told CFO.com. "But insurance companies don't necessarily protect them any better, because they just base their rates on their past experience."
Many employers may be getting the impression that fully insured health plans don't protect them at all. Case in point: In May, the city of Temple, Texas, received proposals for its fully insured health plan that included cost increases ranging from 46 percent to 103 percent. So this Oct. 1, Temple will transition to a self-funded health plan, with Blue Cross Blue Shield of Texas acting as the city's third-party administrator, as well as providing stop-loss insurance, according to a press release. Temple expects the self-funded approach to bring "more transparency in our utilization and costs," said City Manager David Blackburn. "There are significant costs associated with starting a self-funded plan for health insurance that have been borne by the city. In FY2010-2011, employees will typically see a 10 percent increase in their premiums depending on which of the two plan options the employee selects."
2. Health plans limit networks to curb costs. The country's largest health insurers are testing new health plans that combine reduced premiums with a smaller network of physicians and hospitals, reports the New York Times. Aetna, Cigna, UnitedHealth Group and WellPoint are all testing limited-network plans. These plans could help insurers reduce premiums by up to 15 percent--a significant draw for both small and large employers. "What we're seeing is a definite uptick in interest because, quite frankly, affordability is the most pressing agenda item," Dr. Sam Ho, the chief medical officer for UnitedHealth, told the Times.
The price cuts come hand in hand with a severely restricted network. For example, Aetna's limited-network plan in New York allows its members to use roughly half of the physicians and two-thirds of the hospitals that are available in its traditional plans. Insurers believe consumers will appreciate less-expensive options, particularly as the health insurance exchanges come on line. "We think it's going to grow to be quite a hit over the next few years," said Ken Goulet, an executive vice president at WellPoint. However, some benefits consultants believe that limited networks may not be a long-term solution if the reduced premiums are tied to health insurers obtaining bottom-of-the-barrel pricing from providers.
3. Small employers in Massachusetts cancel coverage. Anecdotal reports suggest that more small companies in Massachusetts are terminating their health insurance plans at a much faster pace than ever before and asking employees to sign up for Commonwealth Care, the state-subsidized insurance program, reports the Boston Globe.
For example, roughly 90 small businesses have ended their insurance plans with one Braintree-based broker since April 1 (the date many small-business health insurance contracts are renewed). In addition, small companies have hired a Sandwich-based business consultant to enroll about 400 workers in Commonwealth Care. "They are giving up out of frustration,'' consultant Bill Fields told the Globe. "Most of them are very compassionate but they simply can't afford health insurance anymore."
State officials aren't convinced that a full trend has developed because there hasn't been a significant increase in Commonwealth Care enrollment. In an annual survey of employers, the Massachusetts Division of Health Care Finance and Policy didn't see any significant coverage reduction as of year-end 2009. However, companies report that it is cheaper to pay state penalties for noncoverage than to provide insurance. For example, the Early Learning Child Care center in New Bedford now pays $1,500 in quarterly fines vs. the $30,000 it previously paid out quarterly for health insurance for its 13 workers. - Caralyn