Freed Associates

How to Win in the Small Employer Health Insurance Market

TOPIC: Accountable Care Organizations, Population Health

The Affordable Care Act (ACA) has focused so much attention on the individual marketplace that the sweeping changes in the small employer marketplace have almost gone unnoticed. For many health plans, small employers represent an important book of business. The insurance companies who are the first to adapt their business to embrace the post-reform small employer market will realize gains in market share without sacrificing margins.

The mass exodus from the small employer market, predicted by many, did not materialize. It is clear the small employer marketplace is going to remain viable for the foreseeable future. Now is the time to retool your small business processes to take full advantage of the post-ACA market opportunity.

For years, it’s been assumed that small employers are intensely price-sensitive regarding their health insurance premiums. Price has always been critical to this market. And now because of greater transparency of benefits (through the Summaries of Benefits and Coverage) and the similarity of plans among carriers, small employers have the ability to easily compare their options. They can also offer their employees choices through the Small Business Health Options Program (SHOP) exchanges. There is the option to select multiple products and (in some states) carrier options. Thus, these employers are even more price-sensitive than in the past.

Health plans must be able to efficiently enroll all these customers or risk being buried by additional administration expense.

4 Ways to Increase Efficiency and Improve Your Margins

Many carriers spend upwards of 20 percent of premium income on administrative expenses to service this market. Therefore, a 10 percent increase in efficiency adds two more percentage points of margin. For some carriers this represents nearly all of the margin typically earned on these customers.

Here are some steps your organization can adopt to take advantage of the changes the ACA has brought to the small employer market.

  1. Embrace self-service by moving routine processes online. Quotes, new applications, renewal communications, premium payments, commission statements, and contract documents should all be transacted via the Web. Offering online annual open enrollment services is another opportunity to help lower your costs and improve the accuracy of changes.
  2. Root out workarounds that have become embedded in your service organization. Sit down with your clerks and phone reps and observe your routine processes, such as establishing new groups, renewing groups, answering employer and broker inquiries, printing ID cards, etc. Identify activities that are now obsolete (due to the ACA) or very cumbersome.
  3. Revisit underwriting practices supporting small employers. With the advent of guaranteed issue in the individual marketplace, the incentive for uninsurable individuals to “masquerade” as small businesses to obtain coverage has changed. Analyze the premium differential between your individual and small business products and determine whether there is still risk of this behavior. If you currently go through a verification process to ascertain the veracity of small businesses seeking coverage, revisit that process to see if it is still necessary or if it can be streamlined.
  4. Rethink your sales support organization to acknowledge the increased transparency of your small group products. Simpler product portfolios should translate to more efficient and fewer conversations with your employers and brokers. Your broker service and fulfillment functions are a good place to start to find ways to increase efficiency.

There is no doubt that many health plans have these initiatives within their sights. Those fastest to market will be in a better position to capture market share from those who are not as agile.