EmblemHealth (who has an offices in Harlem) yesterday announced major changes to its health insurance products for small businesses, a move brokers say mirrors actions taken by Empire Blue Cross Blue Shield in 2011 when it cut its business in the small-group market by about two-thirds because the plans had become so unprofitable.
EmblemHealth told its broker network yesterday that it was “streamlining” products for small groups and sole proprietors in the New York City area, effective for new business and all renewing groups on May 1.
EmblemHealth is completely dropping health plans for sole proprietors. And it will only offer three plans to small businesses: its InBalance EPO, ConsumerDirect EPO and HealthEssentials EPO. (An exclusive provider organization or EPO plan only provides in-network benefits.)
Groups and sole proprietors currently enrolled in the dropped plans can keep that coverage.
Based in Manhattan, EmblemHealth is the parent company of insurers Group Health Inc., commonly known as GHI, and the Health Insurance Plan of Greater New York, known as HIP.
EmblemHealth “is not withdrawing from the small group market” but is reducing its products ahead of new Obamacare rules that will take effect when the state’s health insurance exchange becomes operational, said Charlene Maher, the insurer’s senior vice president and chief marketing officer. The new insurance exchange place is one of the provisions of the Affordable Care Act.
The changes, said Ms. Maher, mean “products are more aligned with the exchange. Come April, we have to re-file all active products (with the state) to meet exchange guidelines. This helps us slim down our portfolio and streamline the refilling process.”
That’s not how brokers see it. They claim that the insurer’s new commission structures and underwriting guidelines will drive down enrollment in the grandfathered plans. EmblemHealth ended broker commissions on certain plans, effectively guaranteeing that brokers won’t sell those products because they will have no financial incentive to do so.
Brokers have traditionally played a big role in helping small businesses buy health insurance, acting as advisors to companies that can’t afford a human resources department. Nearly 90% of small group coverage in New York is purchased through brokers, who reap $693 million a year in commissions, according to a study by Boston’s Wakely Consulting Group.
EmblemHealth’s slashing of broker commissions has some brokers considering whether they should start charging employers a fee for advising them.
“It is getting harder to support a non-commissioned product,” says one broker.
Brokers see EmblemHealth’s move as a sign that the implementation of the Affordable Care Act has radically changed the number and types of plans available to New York small businesses.
“It’s a titanic shift,” said Richard Allen, president of American Corporate Benefits. “It’s a default withdrawal of products the public actually wants to buy. In effect, like Empire, EmblemHealth is changing the dynamics of the way the market operates so their exposure is limited.”
One key change is that Oxford Health Plans will increase its dominant position in the small group segment, brokers said. After Empire, and now EmblemHealth, have pulled small business products, Oxford has a near-monopoly on the New York market.
“The unintended consequences of legislative changes has created a de facto single-payer system, where Oxford is empowered to dictate to the New York market,” said Alex Miller, founder of Millennium Medical Solutions Corp. in Armonk, N.Y.
New York state recently implemented a “prior approval” law that gives insurance regulators the ability to regulate insurers’ requested rates. EmblemHealth requested far higher rates for many categories than the state granted. Brokers have heard rumors that EmblemHealth is pulling out products that were not granted higher rates, an assertion EmblemHealth said is untrue.
Insurance rates are regulated by the New York State Department of Financial Services, which declined to comment.
EmblemHealth’s GHI unit filed rate increase requests with the state for 2013 that had a weighted average of 20.6%, according to DFS data. The state only approved 9.2% increases. For HIP products, the weighted average increase requested was 11.4%; the state approved a 5.1% hike. In comparison, Oxford requested a 20% rate hike but was granted a 10.1% increase by DFS (source).
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