Health Care for Small Companies: A Conversation with the Head of a Private Insurance Exchange

Imagine walking into a Nordstrom stocked with only a single pair of black shoes – no options for size, color or shape. Now think of a single insurance plan for all people, regardless of their age, income, medical needs or personal preferences.

Ron Goldstein, CEO of Orange-based Choice Administrators, a private health insurance exchange company, used the Nordstrom metaphor to explain the appeal of multiplan insurance exchanges for small businesses as opposed to plans that are one size fits all.

Under the name California Choice, Goldstein helped launch California’s first small group private health insurance exchange in 1996. The company started with 12 employees has grown to 182 and now operates under the national brand Choice Administrators.

Under Goldstein’s direction, the company serves small to midsized companies through licensed insurance brokers who collaborate with the company. He said people and businesses want the kind of options that exchanges can provide, and the statistics seem to confirm that.

An estimated 6 million U.S. employees and their dependents enrolled in health plans through private insurance exchanges for their 2015 employer benefits, double the number in 2014, according to a report this month by Accenture, a global management consulting company. By 2018, an estimated 40 million people will have joined a private exchange, the report said.

Generally, private multicarrier exchanges provide numerous health plan options to businesses of all sizes. Employers can set a fixed contribution to employee health benefits while passing off administrative expenses to the exchange. The employees select the plans they want and pay their share of the premiums as well as any amounts not covered by the benefits they have chosen.

In contrast to the public exchanges created under the Affordable Care Act, which sell insurance for individuals and small businesses, private-sector exchanges do not offer government tax credits. And critics of private exchanges argue that fixed employer contributions lead to higher out-of-pocket expenses with less coverage for employees.

Early next year, small-business health plans could also be subject to premium rate increases. In 2014, Gov. Jerry Brown signed a law that gave California businesses with less than 50 employees until the end of 2015 to obtain coverage that complies with the requirements of the Affordable Care Act.

At the beginning of next year, businesses with ACA-mandated insurance may incur additional costs because those plans require a minimum set of benefits for all insurees. All plans offered by businesses in 2016 must provide the 10 “essential health benefits” outlined by the ACA, which include things like emergency room care, prescription drugs, pediatric services and mental health.

Goldstein sat down with the Register recently to discuss changes in the health care system, insurance trends, technology, and health-related politics. Excerpts of the interview follow:

Q. What are the benefits for a small business of entering into a private exchange rather than signing up directly with a single carrier?

A. In the direct market, it’s all or nothing. So if I’m going to Anthem, all of my 10 employees have to go to Anthem. So our goal (at Choice Administrators) is to offer a greater distribution of carriers to a group. You come to us and you get seven carriers, business solutions suites, Cal Perks (employee discount programs), payroll and workers’ comp.

We are trying to build a program where an employer can get his 18-year-old son who just started at the company insurance and his 52-year-old employee with five kids insurance.

They can each change every year if they want. Every year, they get a new choice.

Q. In terms of health plan selection, what trends are you seeing for small businesses and individuals?

A. We are seeing people are going towards skinny networks. They are a little less expensive, and you might not have the best hospital in the region, best doctor or provider group, but you are getting what you need and can find a good doctor …

People tend to find what they want, and they are saving money.

Q. Are small businesses with less than 50 employees likely to opt out of providing health care coverage to employees to save money?

A. We don’t see a lot of small groups opting out. Your micro-groups, your mom-and-pop businesses, they possibly could break up and go to the individual exchange, especially if they can get subsidies. It makes more sense. A company with 17 employees offers health care to attract and retain employees. They are not looking for employees to go elsewhere for health care …

I don’t see it as more cost-effective at the end of the day. Individual rates are higher than the small group rates.

Q. Are small-business plans changing to comply with ACA this year?

A. Any business buying small group today is buying ACA. They are buying affordable care; they are just buying it in metal tiers. The small group is honestly not affected by it.

They are still buying benefits the same way they’ve bought them before, except now the benefits are displayed differently and the rates are more competitive.

Q. What do you think will happen in health care if the Republicans win the White House in 2016?

A. That’s a tough one. Where I am in my company, I’d like to see most everything stay the same, regardless of who takes office.

I don’t want to see ACA repealed. The repeal would cost everyone too much money, because we’ve all programed our systems for (ACA) and built our systems around (ACA). Look at the state of California: We’ve spent close to a billion dollars. I doubt they want to reverse everything they have built. It would be a lot of wasted money … It would be nice to go for a couple of years without big changes.

If we are living in the ACA, let’s live in the ACA world and see where it settles.

Q. What health care-related technology changes can small businesses and individuals expect in the next few years?

A. A lot more technology is hitting the marketplace. Online enrollment systems tools.

Every year, insurance companies try to go paperless to become more efficient. More online decision-making tools will probably hit the marketplace.

If I want to compare Anthem, Healthnet and Aetna, I can compare all three, look at what the out-of-pocket costs are, what the premium costs are and show cost evaluations.

So if I know I’m going to need knee surgery, (the new technology) would work more as a predictive tool. It will tell you total out of pocket with Anthem will be $10,000 and your total with Aetna will be $9,100.

So it gives people an idea of what kind of health care situation they’re in, what it might cost them for that year, and total out-of-pocket. It will probably become a pretty important tool.

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