Home > Employee Benefits > More losses for Mass medical carriers may shift risk tolerance for employers

More losses for Mass medical carriers may shift risk tolerance for employers

Last week, the Boston Globe released an article highlighting significant first-quarter losses for each of the  three local nonprofit health carriers. The article highlights all of the new ACA taxes required by the insurer’s,  and how those new fees and taxes will be passed on in the form of higher premiums to fully insured businesses covered by Blue Cross, Harvard and Tufts.

Following the Globe’s report, WGA’s Chairman and CEO Phil Edmundson wrote a blog discussing some unexpected losses by both local and national insurance carriers based on unanticipated pharmacy costs to treat illnesses such as hepatitis. The specialty cost increases in the article are consistent with the rate changes seen by many of our own clients,  and an issue that should concern all businesses. Unfortunately, nothing under the Affordable Care Act was designed to get a handle on  pharmacy expenses,  and we anticipate an accelerated rate of cost increases due to pharmaceuticals.

As I have noted in earlier blogs, small businesses in Massachusetts (those with less than 50 employees) saw significant price fluctuations due to the various requirements under Obamacare. As predicted, we’re now starting to see higher than validated cost increases for our fully insured clients with over 50 employees, as carriers look to recoup losses tied to the various components of Obamacare in the individual and small group pools. Companies need to have strategic conversations with their advisors today in order to plan for these unpredictable and unjustified cost increases over the next several years.

Many small employers are now considering self funding their medical programs which will give them better access to data, more flexibility in plan design, and help to eliminate some of the fully insured Obama care taxes. Massachusetts however, has historically been a conservative marketplace for alternative risk models, with most employers choosing to fully insure their medical programs under 500 employees. That could change.

Another risk sharing option that is gaining momentum nationally is the concept of healthcare captives. In a health care captive, companies with between 75-400 employees pool their risks together and take on various layers of self-funded exposure. By joining captives with other like-minded health engagement focused employers, captive partners aim to manage their healthcare risks while avoiding the Obamacare rates and regulations established in the last few years. WGA, in collaboration with our mid-Atlantic C2 partner Scott Insurance, is pleased to be rolling out a healthcare captive for July 1, 2014. For the last several years, Scott has successfully operated 5 captive groups, and as healthcare costs continue to rise, we believe an increasing number of employers will consider this alternative approach to navigate their risks.

About the Author

Christopher Nadeau is a Principal at William Gallagher Associates and head of the firm’s Employee Benefits Group. He counsels his department to develop and redesign employee benefits programs to match the corporate philosophy, long-term needs and objectives of their clients. He is also an industry leader on Healthcare reform and the cost impact and administrative burden on employers.

617.646.0351 | CNadeau@wgains.com | Follow Chris @Chris_Nadeau

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