The Future of Health Insurance Exchanges for the Small Group Market


By Ron Goldstein

Fall is here, which means it’s the busy season for brokers. They’re working tirelessly with small group clients on new sales and plan renewals. It’s also the time of year when brokers and employers revisit existing benefit plans, discuss possible alternatives and review employee needs.


The Future of Health Insurance Exchanges

Even with the busy season in full swing, brokers continue to contemplate the future of the Affordable Care Act (ACA) and its implications. From whether or not the federal government will continue to fund exchange subsidies to industry consolidation (a la Cigna and Express Scripts) to carrier access, the future of health insurance exchanges is a hot topic among brokers. The good news for everyone is the future looks bright.

Last year, President Donald Trump signed an executive order that allows for the formation of new association health plans (AHPs). Essentially, this allows small businesses to unite to obtain health insurance for employees at a lower cost. With AHPs, groups can join forces based on geography or industry, as a single large employer.

The Reality of AHPs

Here’s the thinking behind expanded association plans: they would offer lower pricing, more choices for participants and increased freedom to purchase health coverage across state lines. It sounds like a win for small businesses and their employees.

However, the reality is AHPs might not follow ACA compliance guidelines, specifically in the areas of mental health services, maternity care and prescription drugs. Nor would they necessarily offer coverage for individuals with pre-existing health conditions. Employees could be left with higher out-of-pocket expenses and larger medical bills. That’s definitely not a win.

According to an issues brief published in August by the Kaiser Family Foundation, more than 52 million Americans under the age of 65 would be ineligible to enroll in AHPs due to a pre-existing condition. For added context, that represents 27 percent of the nation’s total population. That translates to nearly 30 million women and 23 million men. In contrast, policies sold on public and private health exchanges cover pre-existing health conditions and include all of the essential health benefits required by the ACA.

There’s no disputing that cost savings is a key driver behind employer purchasing decisions. While it’s possible some employers may consider moving to AHPs to reduce their health coverage costs, there’s no guarantee of savings for employees. With an AHP, employees could wind up with higher costs for a pre-existing condition and no coverage for certain services required under the ACA. While the perception is an AHP is always cheaper, the reality is that’s not always the case. At present, very few small groups have taken advantage of the AHP opportunity, which mainly targets healthier individuals with no pre-existing conditions.

In September, California announced a new law that prohibits AHPs in the state. Effective January 1, 2019, the state legislature adopted Senate Bill 1375 in response to concerns about the elimination of essential health benefits and potential destabilizing of the small group health insurance marketplace.

Rejoining the Fold

When compared with AHPs, exchanges remain resilient. Carriers that withdrew from state and federal exchanges are rejoining the fold, mainly due to increased competition. This wave demonstrates the continued stabilization of the health insurance marketplace. Case in point, this summer Anthem Blue Cross Blue Shield announced it will re-enter the Virginia marketplace with lower premiums, in time for the 2019 open enrollment period.

Brokers with access to health insurance exchanges are in a strong position to offer benefit plans that meet a variety of employee needs to small group clients. The return of carriers to the exchange marketplace supports the increasing demand for choice from employers and employees alike, while creating more aggressively priced options for participants.

The Consumerization of Health Care

The consumerization of health care, coupled with digital consumerism, establishes an environment where consumers are able to shop for insurance the way they shop on Amazon or Expedia. These types of sites are popular because consumers know what they want to spend, and expect aggregators to help them distill hundreds (or, often, thousands) of options into a specific list of choices based on their specific search requirements. The consumer gets precisely what he or she wants quickly, efficiently and at a competitive price.

Exchanges, especially specialized multicarrier platforms, operate in a similar fashion. They allow brokers to provide their small group clients with the ability to easily compare and contrast many different carriers and medical plans at a variety of price points. They offer choices based on each employee’s network preferences and individual or family health care needs. Exchanges also highlight additional add-on benefits such as dental and vision. This is particularly appealing to employers with a multigenerational workforce with varying health care and insurance requirements.

For example, one employee might choose an Exclusive Provider Organization (EPO) plan because it offers access to his or her preferred doctor and does not require referrals for care. Another employee, who rarely visits the doctor, might choose an HMO because it is a more affordable option. A third individual might choose a Health Savings Account (HSA) compatible High Deductible Health Plan (HDHP), because it has lower premiums and the ability to pay for qualified medical expenses. Ultimately, the plan selection is up to each employee (and his or her employer).

The Win-Win of Exchanges

That’s not where the advantages end. Employers enrolled with a multicarrier exchange also enjoy a streamlined billing process. They only receive one monthly bill for all of their employees’ coverage. Brokers profit, too. As employer budgets shift, brokers can easily counsel clients on whether or not to increase or decrease their annual employee benefits program spending. It makes for a more seamless administrative process for all parties involved.

It remains to be seen whether market forces and association health plans will have a big impact on individual and small group health insurance exchanges. For now, exchanges provide an increasing number of small group employers with customized benefit plan options at a reasonable cost. That’s why they’re not going away anytime soon.

Ron Goldstein, CLU, is president and chief executive officer of CHOICE Administrators.