Featured Health Business Daily Story, May 12, 2014

N.Y. Small-Group Market Isn’t Suiting United’s State of Mind (with Table: Top 10 Health Plans in New York's Commercial Risk Market)

HEALTH PLAN WEEK is the most reliable source of objective business, financial and regulatory news of the health insurance industry.

By ,
April 28, 2014Volume 24Issue 14

New York’s small-group insurance market could be an example of the Affordable Care Act’s success in drawing new competitors, and luring back former players, to health insurance markets. But one existing competitor isn’t very happy with the resulting rate-setting practices.

UnitedHealth Group told investors that during the first quarter, it saw “intensified pricing in several markets, including small group in New York, a large market for us,” according to CEO Stephen Hemsley. Speaking during an April 17 conference call to discuss first-quarter 2014 financial results, he said, “We believe several carriers there, including new entrants, are pricing well below cost and what we would view as unsustainable pricing levels.” The insurer warned that if the situation continues, it could affect United’s risk-based membership level — but not its profitability, as the insurer is not adjusting premiums to compete with the other carriers.

As Jeff Alter, CEO of UnitedHealthcare’s Employer and Individual business unit, put it, “We are comfortable with our pricing in that marketplace. It’s just that others have chosen to be well below our pricing, and that’s going to create an issue in that marketplace.”

He predicted that the “market has got to come back to a more sustainable level.” But in the meantime, he said, “We will talk to the regulator” about the situation.

Alter pointed to two factors:

(1) “New entrants into that marketplace that in our opinion clearly underpriced what the cost structure is in New York — not only our cost structure but certainly their cost structure.”

(2) “Competitors that have left the New York marketplace that chose to re-enter the marketplace in January ‘14.” Those players also “underpriced for what the economics would call for,” he said.

Overall, United has the leading share of New York’s commercial risk membership, according to AIS’s Directory of Health Plans: 2014 (see table, below).

And United’s New York commercial risk market contributes $11 billion in premiums, or 30% of the insurer’s total commercial risk premiums, according to Citigroup Global Markets securities analyst Carl McDonald.

Among new entrants to the New York marketplace, Oscar Insurance Corp. (HPW 12/23/13, p. 1) and Health Republic Insurance of New York, the state’s Consumer Operated and Oriented Plan (CO-OP), did not respond to HPW’s requests for comment on United’s assertions.

As for United’s claim that some insurers that had exited the small-group market returned in 2014 with underpriced policies? McDonald said that “There are two plausible culprits here, as both EmblemHealth and WellPoint dramatically reduced their presence in the New York small group market over the past few years.”

EmblemHealth also did not respond to HPW’s requests for comment. A representative from WellPoint’s Empire Blue Cross Blue Shield unit referred HPW to the New York Association of Health Plans.

Kyle Kautzmann, GBA, an insurance broker with EBNY Insurance Services, Inc., confirms that “the new players are definitely undercutting [the market].”

Oxford Still May Keep Market

But he tells HPW that existing players also are changing plans to comply with the Affordable Care Act, so premiums are going up overall. “I think Oxford [a UnitedHealthcare subsidiary] is still going to get lot of the market.”

He has seen some take-up with new insurers, particularly Health Republic. “I think a lot of people are tired of not too much choice in New York state.” But he adds that new entrants come with start-up issues.

Many carriers’ rates “look good on paper, but when you pull back the layers,” consumers are wary, he says. In the end, “it really comes down to the network,” since consumers don’t want to give up existing providers when they switch insurers.

In addition, many customers don’t want to switch to high-deductible plans. As a result, Kautzmann says, “Oxford is still the only bet on some of these plans.”

Although EmblemHealth and WellPoint, Inc. unit Empire Blue Cross Blue Shield have increased their stake in the small-group market, “they kind of limited the network,” Kautzmann tells HPW.

Plans Have to Estimate Pricing

Leslie Moran, senior vice president of the New York Health Plan Association, tells HPW that plans of all types were at a disadvantage in pricing 2014 rates because of the market changes and the lack of data on new enrollees.

“All of the pricing was done on kind of a best guess. And going into 2015, because we don’t have a lot of presence, I think people are still trying to make a best effort on what they think the costs are going to be and what we think the premiums should be to cover the cost.”

She adds that her association is having ongoing conversations with the New York Department of Health and the New York Department of Financial Services about the lack of data needed to accurately set health insurance premiums.

Top 10 Health Plans in New York's Commercial Risk Market

Health Plan

Commercial Risk
Membership in New York

Market Share




WellPoint, Inc.



GHI, an EmblemHealth Company



Excellus BlueCross BlueShield



HIP, an EmblemHealth Company



BlueCross BlueShield of Western New York and BlueShield of Northeastern New York



Capital District Physicians' Health Plan, Inc.



MVP Health Care



Independent Health Association, Inc.






SOURCE/METHODOLOGY: Commercial risk membership per state estimated by AIS based on data in AIS’s Directory of Health Plans: 2014. Visit http://aishealth.com/marketplace/aiss-directory-health-plans for ordering information or call (800) 521-4323. Enrollment data as available during fourth quarter 2013. Market share as percentage of total commercial insured lives attributed to state.

The AIS E-Savings Club offers regular opportunities to buy AIS products and services at substantial savings. Click here to see the current specials — including a special offer on the brand-new AIS’s Directory of Health Plans: 2014.

© 2014 by Atlantic Information Services, Inc. All Rights Reserved.

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