As per todays Crains article, Empire Blue Cross will be exiting the majority of small group health plans effective April 1, 2012. The news was swirling earlier this week with official Empire communication going out today.

This affects 1/3 of New York Small Businesses as defined by 50 or less FT and eligible employees. Since with large group market the insurer is allowed to rate a group based on true census and make up of a group’s sex, age and family status as well as claims experience of the prior year. In NY State where the small group market is Community rated and independent of census this becomes an important point that I will get back to.

As healthcare has become regulated by MLR(Max Loss ratios) or revenue controls its not surprising that insurers are unhappy but why does it seem that in NYS regulations run deeper than in other states? We are licensed in multiple states and we are not seeing the same pattern this quickly. Numerous companies have already exited such as CIGNA, HealthNet, Horizon, Guardian not to mention M&A of HIP/GHI, Oxford/UnitedHealthcare and Aetna/US Healthcare/NYLCare etc. I can go on.

In NYS the insurance regulations go beyond Health Care Reform (PPACA) with higher MLR than the national one. The Federal level is 80% for small groups and in NYS its 82%

There are new NYS price controls where insurers must anticipate risk a year in advance and ask for larger rate increases to protect on anticipated uncertain risks. With so many unknown variables its almost like asking one to predict who’s going to win the Super Bowl in 2013. Rate increase of 15-20% requests must be higher than usual since after all there are no State protection on the loss side. Furthermore, increases of 10%+ must now require public hearings 60 days prior.

Today, we have so many State mandates that many of the mandates(overage dependents coverage, preventive care, pre-existing for kids) in PPACA didnt even affect NY since they were already in place. Mandates account for approx 17% of the costs of which Small Businesses pay more than fair share. Large corporations and Unions can self insure and avoid some mandates as they are governed by ERISA and not State. To the relief of of our struggling clients on subsidized Healthy NY the State doesn’t play by their own rules and instead opts out of its very own mandates.

So what happened with Empire? The tipping point evidently was rate increase denials of 5 consecutive quarters and that Empire quite frankly got caught with great pricing and products just when healthcare reform came around. Many insurers raised their rates in advance of the law. Emblem (GHI) raised rates 25% on average and even as high as 60% on HSA. Granted they have also removed many plans recently.

Much like in the 70’s its a regulaed oligipoly with insurers too too big to fail. Our clients will have access to only 3 insurer – Aetna, Emblem and Oxford. Just imagine how high your Auto Insurance would cost in the same scenario? This remarkable in a 25 million metropolis like NYC. Insurers do not have to be in NYS, no new carrier is looking to enter the NY market. After 75 years in business and insuring 4 generations of small businesses this should be a shock to the system and a wake up call to every politician.

We ask for greater oversight on Mergers and Acquisition of health insurers,providers and hospitals. Its begining to dawn on everyone that a too big to fail environment is poison and will be the tail that wags the dog. I can only imagine what the other remaining insurers must be thinking whats in store for next year.

Importantly, the community rating ought to be dropped as most states such as NJ, CT are census based. With Health Exchanges coming in 2014 individuals will be able to purchase health insurance on their own which will make Community Rating less relevant. This will be a positive step in allowing great competitors like Humana to enter the market.

If this is not a wake up call for small businesses to have a seat at the table I dont know what is. Anyone in for an Occupy Albany?

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