Small Business Big World
New episodes every Tuesday discussing the challenges, adventures and fun of being a small business owner. Each week we'll delve into various small business topics, from real-world DEI considerations to selling your business, using video to market your business, unique benefit offerings for your employees and so much more. Curated by the crew at Paper Trails.
Small Business Big World
Rising Health Insurance Costs for Small Businesses
Why are small businesses in Maine facing skyrocketing health insurance premiums, and what can they do about it? Join us as we dive into this urgent issue with Connor Kennedy from Acadia Benefits. We'll unpack the complexities of the community-rated small group market, discussing how Maine's aging population and high healthcare costs are pushing premiums higher and higher. You'll gain insights into the implications of merging the individual and small group markets, the standardization of plans and rates, and the effects of the individual mandate's repeal on the insurance pool. This episode promises to equip you with the understanding needed to navigate these turbulent waters.
This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week, we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World, our weekly podcast, where we talk about all the fun and exciting things about being a small business owner. A little housekeeping before we get going. Don't forget to like, follow, share, subscribe, rate, review. We are everywhere Apple Podcasts, Spotify, YouTube, TikTok, Instagram, Facebook. If you are out there, we are out there and you can find us out there too. So today, my guest is Connor Kennedy of Kennedy Benefits. Welcome back, Connor. Thank you for joining us.
Speaker 2:Thank you for having me, Chris.
Speaker 1:So today we're going to talk about why is my health insurance so goddamn expensive, right? I certainly know in health insurance premiums I write Anthem hundreds of thousands of dollars a year worth of checks in my business, and certainly I think that's very common among other businesses. So there's been a lot of changes in the last few years. I feel like every year our premiums go up 10 or 15 percent or more sometimes, and it's been always the game to try to figure out. I think we all as business owners feel like you know, my only choice is to do cheaper. You know, offer less good plans, worse plans, I guess, right? You know higher deductibles and all that kind of stuff. We all hear those things. So, you know, I figured it'd be good for us to chat and see why these things are so expensive.
Speaker 2:Yeah, and I think today what we really want to focus on is the increases we're seeing specifically in Maine and in the small group market. We'll spend too much time if we talk about what our customers say, but I think we'll talk about the community-rated small group market where a lot of Maine's built on small businesses. So I think this will be good for a lot, so let's start right there.
Speaker 1:So what does that mean? I'm community-rated. I'm a small business. What does that?
Speaker 2:mean. So in Maine, if you have under 50 benefit-eligible employees in the preceding calendar year, you were considered a small employer and you are in the community market, so you're not rated based on your experience. Right, how you're how many claims.
Speaker 2:There are the health of your population. You're rated based on the age of your population, the location of your population um, in ma, as we were talking about before this right, we are one of the oldest, if not the oldest, state in the US, so, and we live in the Northeast, which is known for being the most expensive place to receive healthcare. So, with just those two factors right there, you know that we are going to be in a bubble of, you know, high rates.
Speaker 1:So many of these things we're gonna talk about today, or most of these things, are very Maine specific, but certainly many of them may apply in other states. Every state has different insurance laws, different insurance policies. I was saying before, health insurance is just about as exciting as payroll. It's. You know about watching paint dry, right, there's lots of details, lots of minutiae. We're going to try to keep it high level to make sure that everyone understands that. But there's been a lot of changes in Maine the last few years, right, the first one we were talking about earlier is kind of that merging of the markets right.
Speaker 1:Explain to me what happened with that and why that has made an impact.
Speaker 2:Yeah, so back in 23, a lot of you who are listening may recall, maine decided to merge the individual market with the small group market to make it Individual markets.
Speaker 1:You're out on healthcaregov Exactly.
Speaker 2:You have your own individual plan as opposed to having a group insurance coverage through your employer. And one of the main reasons to do this was to standardize plans so you can get the same plan through your employers you could in the individual market. So standardizing the and also standardizing the rates. So, for example, my age, if you had an age-banded policy, the same rate I could get through a small employer would essentially be the same rate you could get on the individual marketplace. What we know is that individual plans historically, before this, were more expensive than having a group policy. That's really not the case today with the merged market.
Speaker 1:Okay. So when we talk about that, I mean that also applies now, because the individual mandate from ACA has been wiped away, right? Right? So we've merged those markets, which means we have two different populations, and now one of those populations doesn't have to get insurance anymore, right? So we've merged those markets, which means we have two different populations and now one of those populations doesn't have to get insurance anymore, right?
Speaker 2:So that's kind of made a difference too, right? Yeah, exactly. And these two items are not directly I guess directly impacting 2024 rates, which I'll talk about in a little bit. But everything compounds on top of each other. So, like you just said, when the individual mandate went away, or I guess, you know, took effect in 2019, when people weren't penalized for not having health care anymore.
Speaker 2:You can look at that in a couple ways, but, you know, one of the things that we've seen or starting to see now is, you know there could be younger individuals that aren't going to be penalized anymore for not having health care right, and as you take people out of the pool and only people who need the policy are paying into the policy right, incurring claims, you can start to see costs go up. So that's kind of a trend we've seen, you know, over the past three years, slowly impacting things. Right, it's a compounding factor.
Speaker 1:Right, there's lots of things we're going to talk about today and all of them add up to say, gosh, it's really expensive to get health insurance. So we were talking explain to me about you know. You're talking about level funding plans and how that works, and that's another one of these incremental changes that have been made right.
Speaker 2:Yeah, absolutely so. Level funding's a great solution for many employers. Now, if you're over 11 employees in the state of Maine, you can get a level funded quote from your broker Now they don't work great for everyone.
Speaker 2:Carriers tend to identify which group A level funded policy will work for and just to back up a little bit, a level funded policy takes you out of the small group community rated system. It's you're underrated specifically on your population. So if you have a young, healthy population that's not incurring a lot of claims, that doesn't have ongoing high-cost claim or risk or taking very expensive drugs, a level-funded policy could be great for your company and there's a lot of positives with it. You can even get some dollars back at the end of the year if you run better than expected. I'm not going to go into detail about all that, but some will say, like we were talking about with the individual mandate, as you start to pull healthy risk out of a big pool of population, that can start to affect individual and small group rates over time.
Speaker 1:So more costs just a little bit more every time right, another chip in the armor. So what about? You had mentioned something about the ICRAs, the HRAs. What is going on with those two?
Speaker 2:Yeah. So how I want to talk about ICHRAs today is specifically not for small employers ICHRAs. But we've seen some large employers that have lots of high-cost claims on their books, right, every single year they're getting 30% increases plus. And you know, this is that tough, that tough employee range where, say, 51 to 100, right, you're not big enough to really be able to handle some of those high cost claims and then you're not small enough to be in the community market. So what an ICHRA allows employers to do is to essentially term their group coverage, give individuals a reimbursement to buy a policy through the individual marketplace. So what we've seen is some of these, some employers, right, who can't which rightfully so, can't handle these 30% increases year after year after year, are able to kind of put that claim risk back into the individual marketplace and continue to pay their reimbursement every year. So it's, it is a cost saver for some large employers. But again, we're talking about compounding things that are happening here as we're putting.
Speaker 1:Well, you're taking more people out of the pool, right, right, right. You keep going back to that.
Speaker 2:And you're putting bad risk into the pool, right? So we're seeing I don't think we're seeing the effects of that yet I think that is possibly to come Right.
Speaker 1:Right, because this is a one big actuarial formula. Somewhere there's a bunch of geeks in a room, somewhere that know way more about this than we do, I'm sure, but that are really crunching the numbers and saying, okay, we need this many healthy people to pay for this many sick people to you know to get to the end of the day.
Speaker 1:What's this many sick people to get to the end of the day? What's it cost you every month? And certainly that's a very complicated formula that I will probably never understand. I mean, I get the gist of it. But so in Maine we've had some legislative adjustments that have really started to drive the change in rates right, and those are. A lot of them are great. A lot of them are improvements. They are requiring the. A lot of them are improvements, they know, requiring the carriers to be offering certain things, which is wonderful benefit, but obviously those come at a cost right, so, yeah, so what's been going on in the legislature that's causing some of those things?
Speaker 2:Just, you know, carriers are companies just like everyone else, where you know if they are being required to take on an added risk, they're going to increase their cost, and so who has to pay for that?
Speaker 2:It's the members, right, your premium is going to go up. So in 24, there were a lot of significant state mandates that went into place that carriers were required to cover certain services, and the one that really drove a lot of claim costs was access to fertility care. We've heard from different carriers that that added anywhere from two and a half to three percent on rates. So say, we're talking about a an eight to ten percent average trend increase every single year for pharmacy and medical, not talking about everything that we've talked about already. That's just talking about medical and pharmacy. When we start to add in these state mandates, we're talking about another two and a half to three percent that's added in. And, like you said perfectly before, is these benefits are great for people, right? This is, this is a positive for people, but someone has to pay for it, right? So it's going to come back down to the members that are enrolling in the policies to pick up that cost Right.
Speaker 1:What other types of I mean? Certainly fertility is the big one. We certainly know fertility treatment is not cheap, right, and that's coming in there. What are some of the other ones that have been out there that really have made the changes?
Speaker 2:Sure, I mean, there's a list of about five of them here, you know. Remove barriers to abortion coverage. Promote better dental care for cancer survivors. Improve outcomes for persons with limb loss. You know the main driver, though, that we've heard from the carriers that were going to put the most risk on them to increase their rates.
Speaker 1:Was the fertility? Yes, absolutely interesting. Yeah, yeah, I think, certainly again, as you get, the more you have to cover, the more it's going to cost to do absolutely and it's a great benefit for the people that need it right now that they had.
Speaker 2:Now they have a and obviously the carrier is going to have prior authorization requirements and they're going to put areas in place to make sure it's appropriate for that employee or member, but with it being required to be covered. Yeah, the rates are going to increase.
Speaker 1:That's good Interesting, so talk to me. The other thing we talked about was this guaranteed reinsurance program, which kind of when we talked about this. I'm like I didn't even know this existed, and I'm sure most people do. Can you explain what that, what it is and what changed its?
Speaker 2:cause of issues you may not know, but today you're paying about $4. I think it's $4 per employee enrolled that the carrier is paying to Megara, which is the main guarantee access reinsurance association. So that's probably somewhat new to people. They probably haven't heard of Megara before. But Megara, basically what it is is that all the carriers pay into this reinsurance TPA, this reinsurance program, and if they, they are reimbursed for certain high cost claims that members incur. So for 23, for example, carriers were reimbursed 100% for all claims between 90K and 275, right? So if I had a cancer claim that was in that 90K to 275, the carriers will be reimbursed by the Megera for that claim right.
Speaker 1:So it's insurance for the insurance company, it's insurance for insurance exactly Now the parameters of Megara is changing for 24.
Speaker 2:And this is a big cost driver, you know. I think on average our small group block got hit with about a 15% increase this year for 2024.
Speaker 1:Don't tell me that.
Speaker 2:You're coming to me in a couple months with changes. Don't tell me that. So one of the big changes that happened with Megara is that carriers will now be reimbursed 75%, so not 100% anymore. They're being reimbursed 75% for high-cost claims between $135 and $275. So we've lessened the coinsurance that carriers are getting that now it's $75, and we've shortened up the window. So carriers look at that and say oh no, but again, like we talked about, they're not going to take on this added risk, right? This risk is going to be pushed back down to the payers who are paying the premium. So that's one of the reasons why we will see. You know, I think an abnormal increase in 24 is. I think you know my note here is, or is about one third of the increase rates for 2024 has specifically come from Megara. Wow, there we go.
Speaker 1:Can't wait to see our renewal. Yep Can't wait to see our renewal. So you know, aside from all of these legislative changes and the mechanics of the changing marketplace, we've been feeling the increased cost of life everywhere, and that doesn't stop at the drugstore or at the hospital, right, All those are going up as well, and that's driving added costs to the insurance companies which they're passing on right.
Speaker 2:Exactly Everything's going up, right, and we had talked about earlier normal whether it's new technology, new drugs, normal inflation I mean medical and pharmacies anywhere between eight to 10% any year, like that's what you should be budgeting for. Now there's it's different with all small groups, right? Whether you bring on a few younger individuals at renewal, maybe a couple older individuals drop off, vice versa, right, this can go both ways with lots of different companies, but on average, that's what it will be. Now, when we start to talk about everything we talked about today merged market level funding, ichras, maine's one of the oldest populations in the country, the Megara right you start to tack on everything, you can see how this average increase of 15% to 18% is what we are seeing in the small group market.
Speaker 1:Which is scary for all these small business owners out there. Certainly, I think we all feel the need to be, or that we should be, providing for our employees and making sure that is. What are you seeing? What levers and switches are you seeing people your clients use to manage these costs?
Speaker 2:and these increases, yeah, so in the small group market it's very rigid, so it's all about shifting cost. So I guess we can talk about shifting cost in two ways. You can shift costs through plan design, right, so you're shifting cost to people that use the plan, so not everyone hits their deductible out-of-pocket every year right.
Speaker 2:It's a very few, so that's probably the most common thing that we'll see. Right, most brokers will show you a bunch of alternates at every single renewal. You know, say, you got a $1,500 deductible plan with a $5,000 out-of-pocket max, something like that. To take down some of that 15, you may be looking at a $3,000 deductible with, you know, a $9,000 out-of-pocket max. Right, it's just shifting costs in that way. Maybe you want to put a dual option in, right, and you as the employer can say, hey, I'm going to pay all my, I'm going to pay 80% of the low cost option. If you want to buy the higher option, you know you pay the difference, right? So there's cost modeling changes that you can do as well, and that'd be the second portion of shifting cost what you as the employer are going to do with your contribution strategy.
Speaker 1:And we see a lot of clients that are using HSAs and things like that. The employer is putting into an HSA to help you cover a higher deductible or something like that too. Right, absolutely, because that may make a difference.
Speaker 2:High deductible health plans are very common in the Northeast and we had talked about a lot of this last time too, when we spoke. But HSAs are. I think that they're great. They require more employee education, but when you put them in and employers are used to them, I think they value them. And the key piece about a qualified high deductible health plan is pairing that with the health savings account. Paying a lower premium and then having an employer or yourself fund an HSA that rolls over every year is a great way to build. We call it the healthcare 401k.
Speaker 1:Sure, which that's a whole different conversation, probably. But what are you doing with that education? Because I know my employees in particular. They're great, but forever right. Everyone's used to just going to the doctor and paying my $25 and walking out. And how are you changing that mindset of no guess what? That doctor's appointment is now $180 and you have to pay that out of your HSA or out of your pocket until you get to whatever point, right?
Speaker 2:Yeah, we think most of the time employees will just see an open enrollment presentation, maybe once a year, right? Something that we do do at Acadia Benefits is that we can provide recordings. We call them, you know, benefit education recordings so we could look at the benefit plans that you have today. We'll do a recording on what's covered. You know, anything that's new for 24, anything to keep an eye out for, right? Hey, this copay went up here like you're talking about, or? Or, hey, you know it's deductible co-insurance now on that tier four drug. You know, keep an eye out for that, things like that, right? So then you can have that recording available for employees to watch whenever they'd like.
Speaker 1:It's interesting, I know. I think it's just really changing the mindset and certainly I think healthcare is trying, the whole market is trying to change people to being much more consumer driven and oriented and and saying, hey, maybe you can get your MRI. You know, at the trailer down the street, you don't have to go to the big shiny hospital. You know, an MRI is an MRI right.
Speaker 1:You know, certainly I think we many people might, for itself, probably include is I need to take care of myself, I need to have the best care, whatever, and that might mean going to the Taj Mahal.
Speaker 2:It might not right, yeah, People, you know they design the plan so people can make their decisions. Right, the message we always push if it's not an emergency, stay out of the emergency room. Right, You're going to get to deductible co-insurance there. Go to the urgent care.
Speaker 1:It's more often to co-pay, unless you're on a high deductible health plan. But it's going to be a much lower out-of-pocket cost to you if you hit that urgent care. But of course, if it's an emergency, don't go to the emergency. Sure, sure, sure. You know this is my brain spinning and all the things and reasons that this is. You know, things are so expensive and certainly I think we'll continue to see things evolve as the legislature acts, as costs continue to rise, and I don't think this is anything that's going to go away anytime soon, unfortunately. But I think it's been really helpful to me as a small business owner to understand all of these things that are going into it. So thank you very much.
Speaker 2:Absolutely, and we were talking just, you know, as your renewal coming out, or as you know all you know employers or renewals are coming up. You know, make sure, when you're getting your quote right, that you're able to see alternates from alternate carriers, right? I think, especially in the small group marketplace, you really want to look at what's available to you, because you never know where when a carrier is going to be competitive or not, right? We've seen some carriers be very competitive in Q1 and Q2. They've raised their rates a ton for Q3, q4, right. And now other carriers are more competitive. So it's looking across the board, looking at the plan options and the carriers available.
Speaker 1:One of the things you've been great about is giving us that spreadsheet with.
Speaker 2:I feel like 150 options. All right, then we get on the call and narrow it down Right, which?
Speaker 1:usually I look at about four columns, right, I really don't care about all this, but it's really helpful to see that and see what's out there and so that you know, and certainly we've talked with mutual clients and said you're going to get that, You're going to have the 150 options to choose from, which is really helpful when trying to make decisions, and that's when that plan, design and things like that kind of come into place. So good.
Speaker 1:Well, thank you so much, Connor. It's great to have you back and chat about this brain numbing topic, for sure.
Speaker 2:We can do it again, so thanks for having me.
Speaker 1:Well, we'll do it again. For sure, there's plenty more. Maybe that you know the healthcare 401k.
Speaker 2:Yes absolutely.
Speaker 1:That's one to have too, for sure, so awesome. Well, thank you very much for joining us. Be sure to like, follow, share, subscribe, rate, review everywhere you are. If you have any questions for us, you trailscom, we're happy to get you in touch. How do people get in touch with you, connor? What's the best way? Instagram?
Speaker 2:email LinkedIn.
Speaker 1:LinkedIn.
Speaker 2:Connor Kennedy, katie benefits. You can always reach out, contact us through our website as well, and then someone from Katie benefits will get in touch with you, mostly same day.
Speaker 1:Awesome. Well, thanks everyone for listening and we'll see you next week. Thanks for listening to this week's episode of a small business, big world. This podcast is a production of Paper Trails. We are a payroll and HR company based in Kennebunk, maine, and we serve small and mid-sized businesses across New England and the country. If you found this podcast helpful, don't forget to follow us at at Paper Trails Payroll across all social media platforms and check us out at papertrailscom for more information. As a reminder, the views, opinions and thoughts expressed are the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper Girls does not imply endorsement of or opposition to any specific individual, organization, product or service.
