These companies are dropping group health insurance fast

These companies are dropping group health insurance fast | Insurance Business

These companies are dropping group health insurance fast
Small businesses with fewer than 50 employees are dropping group health insurance plans at a fast rate, surprising the industry beyond even what many health insurers expected. According to a report from the Wall Street Journal, the trend is especially significant among America’s smallest businesses—those employing just two to 10 workers.

Aetna Inc. and Kaiser Permanente both admitted to seeing a decrease in their small business demographic, describing the trend modestly as “some erosion” or “some contraction.” Kaiser Vice President Joe Smith said the trend was particularly strong in areas where insurers are offering inexpensive individual plans—seen as a good alternative for business owners who no longer feel they can afford offering a group plan.

WellPoint Inc., the nation’s number two insurer, also noted a significant decrease in small business enrollment. During a call with analysts discussing its third-quarter earnings, WellPoint admitted it has lost about 300,000 policyholders since the start of the year and its initial projection of a five-year drop-off in small business would now be compressed into two years.

Many business owners choosing to drop coverage have cited higher premiums as their primary motivator. Affordable individual plans offered through online exchanges have also been key in helping employers take the plunge, with additional subsidies for lower-income workers.

“That’s often the main determining factor,” Michael Stahl, senior vice president at HealthMarkets Inc. agency, told the Journal.

For their part, producers and insurers are attempting to recapture at least some of that lost business buy signing up employees for individual plans. Commission for these individual policyholders is slim, though—already a decline from writing small business, and cut further still thanks to changes in the medical loss ratio under the Affordable Care Act.