When it comes to individual and small group health insurance, consumers are shopping around.
That can mean more volatility for insurance companies, but better choices for consumers.
It’s all due to the Affordable Care Act, where individual coverage is often not dependent on employer-provided plans, coupled with prohibitions about denying coverage based on pre-existing conditions — which translates to greater opportunities for consumers to take charge of their insurance expenses and change coverage every year.
And in the two years since the ACA became law, many have done just that.
For some insurance companies, the annual fluctuation is significant.
“Since the exchange started … we’ve seen pretty big fluctuations in individuals coming into and out of [Kaiser’s coverage], to the tune of about a 20 percent swing,” said Holly Kortun, executive director of Kaiser Permanente Southern Colorado, adding that, prior to the state’s exchange, there was slow, steady growth.
“We didn’t have those kinds of swings at all,” she said.
Kortum said while many consumers shop with the bottom line in mind, Kaiser strives to develop brand loyalty by providing value to their customers.
“We’ve worked … to create a member experience when they do select Kaiser, that people want to continue and stay with over time,” she said.
Kaiser benefits include mobile apps and cost estimators, virtual tours of in-network medical facilities and virtual visits with health care professionals.
“Kaiser also created a Southern Colorado resource team,” Kortum said, adding those employees have expertise in their region and can provide customized advice.
“Members get a very local feel to their experience,” she said.
Exchange equals competition
The 20 percent churn experienced by Kaiser is in line with the state marketplace average, said Kevin Patterson, interim CEO of Connect for Health Colorado, the state-run insurance marketplace.
Of the 94,000 people who renewed Connect for Health policies this year, 18 percent changed insurers, he said.
“One thing we provide as a result of the exchange is competition,” Patterson said, adding Connect for Health Colorado features 10 carriers offering a total of 176 plans. Individual plan premiums increased in 2015 by an average of less than 1 percent, he said.
“But we try to tell people, when shopping, to look at more than the premium,” Patterson said. “Look at your out-of-pocket costs, look at the medications covered and if your doctor is in the network.”
Vincent Plymell, spokesperson for Colorado’s Division of Insurance, said more choices changed the individual market.
“Before the [exchange], you didn’t want to step back into the world of underwriting,” Plymell said, referring to health evaluations and paperwork associated with new policies.
“[The insured] tended to stay with what they had, even through premium increases. In this world, you can review options and aren’t stuck with what you have. People can now shop around and can’t be denied for existing conditions. You can find the policy that suits your needs and is agreeable to you financially.”
Plymell said carriers must pay attention to the competition as customers shop for the best value for their dollar.
“Price is still the big thing, but more and more [insurance companies] hope people will look at other factors,” he said. “Do they have my doctor [in their network]? How do they deal with prescriptions? Is their customer service responsive and do they get back with me right away?”
Testing the water
While the exchange provides individuals the opportunity to shop around for an ideal plan, savings and flexibility aren’t features exclusive to the individual market, according to Terry Reams, executive vice president and employee benefits market leader at insurance broker HUB International.
Self-funded plans, often seen in businesses with more than 200 employees, have made their way into the benefit portfolios of small businesses as well.
With fully insured plans, employers contract with insurance companies to cover employees and dependents. Self-funded plans allow the employer to assume direct risk for payment of the claims for benefits. Administrative costs can be cut by 5 to 10 percent, and employers can craft plans to fit specific needs and budgets, according to Reams.
Delta Dental, the largest dental plan system in the country, introduced self-funded small business plans this week.
According to Mark Thompson, director of sales and client services for Delta Dental, benefits in addition to cost savings include flexible plan design and data to drive employer decisions.
Thompson said dental coverage, due to its low overall payout risk, is a great way for employers to test the model.
“A significant amount of employers of between 80 and 200 [employees] have some sort of self-funded arrangement,” Thompson said. “It’s a great toe-in-the-water situation for [employers] because dental plans limit annual maximum coverage for employees. It’s an opportunity for employers to look at self-funding to further consider offering medical [self-funded] plans.”
A survey conducted last year by Delta Dental indicated churn on the individual market exists within the small group market as well. According to the survey, half of Colorado businesses with between five and 49 employees considered switching plans moving into 2015. Only 21 percent of businesses with 50 to 100 employees had similar strategies.
Reams said industry predictions before the ACA passed indicated small businesses would whittle health and dental coverage and encourage employees to shop the exchange. Those predictions have not panned out.
“We’re not seeing that wholesale change we feared early on,” Reams said. “The suggested trend was employers would start dropping their group insurance and push everyone to the exchange. [Connect for Health Colorado] is doing OK, but there hasn’t been a wholesale swell.”