Healthcare Proposal Offers Relief for Small Businesses

A bill offering healthcare insurance relief for struggling Connecticut small businesses will be reviewed by the General Assembly’s Insurance and Real Estate Committee.

HB 6710, supported by CBIA and a number of Connecticut-based trade associations and nonprofit groups, provides a pathway for small employers to aggregate buying power and purchase large group health insurance.

The bill, which is scheduled for a Feb. 21 public hearing at 2:30 pm at the Legislative Office Building, appears to have growing bipartisan support in the General Assembly.

Small business healthcare insurance costs have been the focus of numerous hearings and bills over the years.

Market Volatility

Today, small employers are experiencing volatility in the small group market due to unpredictable rate increases, lack of market power, and restrictive rating requirements.

With the recent withdrawal of a major health insurance company from the fully-insured small group market and double-digit rate increases approved by the Connecticut Insurance Department last fall, legislators are looking for solutions outside of existing Affordable Care Act options.

A number of states have paved the way for association healthcare plans, with Virginia last year passing a bill that largely mirrors the bill now before the Connecticut legislature.

CBIA's @WyattBosworthCT says the bipartisan association health plan bill offers "exciting possibilities" for #smallbiz. “By allowing small businesses to band together and get large group status, the block can operate as an active purchaser.” #healthcare https://t.co/aWklDjvSOf

— CBIA (@CBIANews) February 6, 2023

“I think the small group market has reached an inflection point,” CBIA’s Wyatt Bosworth told the Hartford Business Journal.

“That’s highlighted by the fact that small businesses are struggling right now to find workers.

“We have a massive workforce shortage in this state, so the benefit packages that businesses are able to offer are becoming more and more important.”

Solutions

HB 6710 offers two pathways for trade associations and nonprofit groups and their small employer members to aggregate membership and purchase the same coverage enjoyed by large employers.

First, the bill allows U.S. Department of Labor-complaint, bona fide trade associations to purchase fully-insured, ACA-compliant large group healthcare insurance for employer members.

Only employers with more than 50 full-time equivalent employees can currently access this market, which offers more flexibility and more affordable coverage.

Small groups and large groups have different sets of regulations on insurance benefits and taxes, with pricing representing another significant difference.

Only employers with more than 50 employees can access the large group market, which offers more flexibility and more affordable coverage.

Those small groups have virtually no negotiation power when it comes to price and benefits. Prices are set in stone and brokers have limited ability to lower costs.

However, in the large group market, the larger group (i.e. the association), has the buying power to negotiate prices, benefits, and services.

“Large employers have the scale to negotiate better prices and plan designs with their insurance carriers,” Bosworth said.

“By allowing small businesses to band together and get large group status, the block can operate as an active purchaser.”

Small Group Disadvantages

Second, the bill allows trade and industry associations of significant scale to offer a self-funded insurance product to their employer members.

As currently drafted, the self-funded product will be subject to Connecticut Insurance Department oversight, including strict capital and reserve requirements, licensing, and audits.

The plans would also be subject to a number of federal health insurance statutes including the ACA, HIPAA, and ERISA.

A large, self-funded product has a number of advantages unavailable to small employers. By aggregating workers from many employers, associations increase their negotiation leverage on benefit plan costs.

The plans would also be subject to a number of federal health insurance statutes including the ACA, HIPAA, and ERISA.

 An association has access to medical claims data and pricing information which can be used to identify overpayments and inefficiencies in the plan.

Given that increased bargaining power, an association can implement value-based insurance design that ensures better health outcomes, service navigation, and powerful wellness programs to promote healthy lifestyles.

And through self-funding, the association can play a bigger role in managing health benefits and lowering administrative costs.

Both options, whether fully-insured or self-funded, will help level the playing field between large and small employers, and provide much needed flexibility and pricing relief for struggling small businesses.

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For more information, contact CBIA’s Wyatt Bosworth (860.244.1155) | @WyattBosworthCT