C h a n g e s i n H e a l t h Ca r e F i n a n c i n g & O r g a n i z a t i o n Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts by Mark A. Hall, J.D., Wake Forest University October 2012 Changes in Health Care Financing and Organization is a national program of the Robert Wood Johnson Foundation administered by AcademyHealth. Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 2 Table of Contents I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 II. Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A. Basic Structure and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 B. The Connector’s Basic Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1. Pricing Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 a. Administrative Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 b. Rebates and Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 c. Lower-Cost Limited Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 d. Benefits Standardization and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2. Enhanced Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 a. Employee Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 b.Complications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 c. Adverse Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 d. A Change of Heart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 e. Employer Shopping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 f. Service and Information Technology Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 C. Political, Institutional, and Miscellaneous Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1. Employers’ Views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2. Insurers’ Views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 a. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 b. Blue Cross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3. Brokers’ Views . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4. Connector’s Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 III. Applicability to Other States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 IV. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 3 Introduction employers support reform and have main- adverse selection (Jost, 2010). Although tained or even increased their willingness each state’s market structure is distinct A. Background to offer insurance, the Connector launched and some trial-and-error is unavoidable, The small-group employer market is a core its small-group program late in the reform it can be helpful to know more about concern of both federal and Massachusetts process, and few employers have elected to what has and has not worked so far in health insurance reforms. Both reform purchase insurance through it. Of 40,000 Massachusetts in attracting employer par- laws require the government insurance people who purchase private insurance ticipation, and why. exchange to include a component spe- through the Connector, only about 10 per- cifically for small firms. There are good cent do so as part of an employer group, B. Methodology reasons for this effort to improve the and almost all of these employers are This qualitative investigation consists small-group market. Millions of the 40 “micro-sized” (5 or fewer), with an aver- of document review and in-depth inter- million Americans who work for small age of only about 1.5 employees per group views. The document review focused on businesses are uninsured. Whereas almost policy (Massachusetts Health Connector, reports, studies, data, and other informa- all employers with 200 or more employees 2010). This employee enrollment consti- tion sources that relate to employers’ use offer health insurance to their employees, tutes less than 1 percent of small-group of the Massachusetts Connector, such only about half of employers with fewer employee coverage statewide. as the Connector’s quarterly and annual than 10 employees do so. A substantially reports, presentations and minutes from greater portion of small-group premiums Federal insurance reform is modeled meetings of the Connector’s governing go to overhead costs (profits, administra- substantially on the successful reforms board, market reports and surveys from tion, sales costs) than in the large group in Massachusetts, including its version the Massachusetts Divisions of Insurance market, and small-group insurance tends of a health insurance exchange (Long et and of Healthcare Finance and Policy, and to have higher cost-sharing obligations for al., 2011). To learn from both the suc- analyses of the Connector performed by patients. In addition, most small firms with cesses and limitations of the Massachusetts others who have studied it. insurance select only a single plan, whereas reforms, this study investigates employers’ larger firms usually give workers a choice use of the Connector in order to inform The author conducted the investigation’s of coverage options. states and the federal government about interviews, in person or by telephone, with best strategies for design and operation 37 key informants identified from public Small-group insurance exchanges are meant of their new small-group health insurance sources and through a “snowball” approach to address these problems. By standardizing exchanges and market regulations. Earlier in which initial sources recommended and streamlining benefits, they aim to make research on the Connector has focused sources from similar or different perspec- it easier for employers or their agents to find mainly on its role in enrolling individuals tives. The interviewees included 11 current affordable insurance. A government clear- who, with or without subsidies, purchase and former Connector officials, board inghouse for private insurance also seeks to nongroup coverage (Doonan and Tull, members, and other government officials; reduce administrative and sales costs and 2010; Lischko, 2011). Much less attention 15 independent insurance brokers (also to focus choice on the insurers that offer has been paid to Massachusetts employers’ known as agents) or employee benefits the best value. Finally, exchanges are a use of the Connector – a gap this study advisors; four representatives of employer mechanism by which small employers might was designed to fill. industry and trade groups; and eight rep- feasibly offer health insurance in a fashion resentatives of four insurers in the market, that enables workers to choose from a wide The reasons for low employer use of the including the market’s three largest plans. array of insurers and plan options. Massachusetts Connector so far merits Interviews with insurance brokers included close attention. The role of employers is four who have served on the Connector’s Despite the promises of the exchanges, important to the potential success of the advisory board and two who have sold most private or government health insur- new health insurance exchanges. Employer some insurance through the Connector. ance exchanges so far have failed to gain participation will help exchanges achieve substantial market share. To date, this track economies of scale and market penetra- The interviews inquired about the advan- record holds true in Massachusetts. Its tion that will allow them to reduce costs tages and disadvantages of the Connector exchange, called the Health Connector, has and impose competitive discipline on the for employers, whether insurance should had notable success in expanding coverage rest of the market. Further, if employer be selected by employers or employees, for individuals, but so far it has not made use of exchanges is not broad-based, how billing arrangements work for employ- major inroads into the employer-based then exchanges might become targets for ee-selected coverage, the role of insurance insurance market. Although Massachusetts Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 4 brokers within the Connector, product individual purchasers, who constitute 4,443 lives. Not all of these enrolled direct- design inside and outside the Connector, 35,082 or 89 percent of the 39,623 people ly with the Connector, however, as many pricing differences between the Connector in CommChoice, as of August 2012. The are legacy accounts brought in by SBSB. and the outside market, any adverse selec- Connector’s employer enrollment accounts To date, the Connector’s small-group com- tion issues relating to employers’ use of for less than 1 percent of small-firm cover- ponent clearly has failed to meet its goals. the exchange, and various techniques that age statewide. Although the Connector did not begin have worked and not worked for increas- actively marketing its small-group program ing employer participation. As discussed The Connector first made individual (non- until the first part of 2012, many observers below, interviews also probed whether group) CommChoice enrollment available remain skeptical that it will gain much trac- these views and experiences are expected in 2007 but it did not offer small-group tion, although some remain hopeful. The to translate to the Affordable Care Act’s employer plans until 2009, and then only reasons, broadly considered, may be under- (ACA’s) new exchange structures in other on a limited basis. The Connector’s small- stood through two sets of factors. The first states or whether they are unique to the group program has had two distinct phases. relates to the Connector’s basic value prop- features of the Massachusetts reform law The first, called the Contributory Plan, was osition—that is, whether it offers better, or or market conditions. designed to pilot an approach that allowed at least equivalent, value compared to the individual employees to choose their own other products and purchasing mechanisms Interviews were semi-structured, following insurer. Participating employers selected a available in the market. The second set of an interview guide developed in consulta- reference plan that determined their contri- factors focuses on political and institutional tion with the project’s consulting advisors. bution; employees were then free to select factors that might hamper the Connector, Detailed interview notes were coded using alternative insurers and benefit options apart from whether it offers better prod- specialized computer software and were within the same tier of benefits selected by ucts at lower prices. analyzed, along with documentary materi- the employer. After not quite a year, the als, using standard qualitative methods Connector ended the pilot, having enrolled B. The Connector’s Basic Value (Bradley et al., 2007; Weiner et al., 2011), only 77 employers covering 207 workers (or Proposition including triangulation (seeking to confirm 388 people, including family members). 1. Pricing Issues or disconfirm points from various perspec- One long-time market regulator and tives and information sources). The Connector then revamped its small- observer stated a point that was echoed employer program, which it relaunched by many others: “It’s been really, really Findings in early 2010 under the name Business hard to figure out what value proposition Express. Mirroring the market’s conven- [the Connector has to offer].” The most A. Basic Structure and History tional purchasing model, Business Express straightforward reason is community rat- The Massachusetts Connector divides its requires all participating employees to join ing, which is required by Massachusetts law operations between subsidized insurance the single plan selected by the employer. A (and by the ACA). Community rating in for the low-income population, known as principal reason for this change, explained Massachusetts and under the ACA requires Commonwealth Care (or CommCare), and in more detail below, was (according to insurers to offer the same prices inside private, unsubsidized insurance, known as several well-placed sources) the desire and outside the Connector for products Commonwealth Choice (or CommChoice). to transfer a block of business that was with equivalent actuarial value. Therefore, Eight insurers participate in CommChoice, already enrolled with the Connector’s even if the Connector were able to gen- including all of the major companies in the third-party administrator (TPA), the Small erate economies of scale or bargaining commercial market (Blue Cross, Harvard Business Service Bureau (SBSB). This TPA power to reduce costs, those efficiencies Pilgrim, Tufts, and Fallon), along with several is also a trade association that, for several would not be uniquely reflected in prices smaller plans and more recent market entrants decades, has marketed health and other for the Connectors’ products as compared (Neighborhood Health Plan, Celticare, Health insurance products, and the two parties to the outside market. Instead, by law, Net, Health New England). (SBSB and the Connector) decided that it insurers must continue to use the same was mutually advantageous for SBSB to pricing structure for all of their products Massachusetts has merged its individual consolidate its small-group health insur- regardless of the particular sales vehicles. and small-group markets for most rat- ance operations through the Connector.1 Even then, a number of brokers thought ing and regulatory purposes, but the that some insurers were charging slightly Connector markets its coverage separately As of June 2012, total enrollment in more through the Connector than for to small groups and individuals. Overall, Business Express stood at 1,680 employers, similar coverage they offered outside the the Connector’s private (unsubsidized) representing 2,489 workers and an addi- Connector. insurance enrollment is dominated by tional 1,954 family members, for a total of Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 5 a. Administrative Costs Although the Connector pays brokers’ ness owner or family members; and it is Connector officials noted that they commissions out of the administrative not clear that the subsidy will continue achieved one clearly demonstrable cost fee and thereby saves the insurers that beyond its initial few years of funding. savings by eliminating the fee paid by the expense, insurers see no savings for Another reason was more specific to smallest employers to purchase insur- individual insurance since they pay no Massachusetts: many interviewees noted ance through intermediary organizations. commissions for that business. In addi- that wage scales in the Boston area are In Massachusetts, most leading insurers tion, insurers believe that the Connector’s substantially above national averages,3 other than Blue Cross do not sell small- administrative services save them little or especially for firms with mainly white-col- group coverage directly to groups smaller no money because they need to maintain lar workers, and so firms that are willing than six employees. Instead, they sell such the same services for their non-Connector or able to offer insurance are not likely to coverage through trade associations such clients, and insurers engage in extra effort meet the income limits needed to qualify as SBSB or the Massachusetts Business to interact with the Connector and its for the program. Association (MBA), which work with TPA. Therefore, insurers believe that the independent insurance brokers. Prior Connector’s fee creates, on balance, a net In addition, there was widespread skepti- to the Connector, these intermediaries added expense. Whichever side might cism, and some misunderstanding, about charged employers a monthly service fee have the better of this debate, it appears the wellness program’s requirements. of $35 per employee for purchasing health that the Connector at least does not reduce Some people thought wrongly that the insurance. The Connector reduced the administrative expenses. incentive accrues only if the wellness fee to $10 a month and then eliminated it features in fact save money, which they altogether, saving employers several hun- b. Rebates and Tax Credits doubted would occur. Others thought dred dollars a year per worker. Connector officials believe that it that the wellness program would impose offers lower prices in other ways. The unacceptable demands on employ- As a result, the Connector’s effective prices Connector is the exclusive source for a 15 ers and workers. To the contrary, the for groups smaller than six were, for a time, percent rebate to employers instituted by requirements appear to be so lenient that somewhat lower than those in the outside the legislature (as of July 2011) for lower- knowledgeable sources referred to them market (except for Blue Cross). However, wage small firms that adopt wellness pro- as a “laughable” “joke.” Initially, the the two leading intermediaries soon grams. Eligibility for the subsidy mirrors program requires only that one-third of eliminated most of this price advantage by the eligibility rules for the new federal workers fills out a health questionnaire reducing their per employee monthly fee to small-firm tax credit under the ACA. In and receives an annual physical and that match competition from the Connector.2 combination, the state and federal credits employers make some effort to create Therefore, although the Connector was could amount to 50 percent of an employ- a healthier work environment, although able to achieve a moderate, one-time reduc- er’s contribution to health insurance. more requirements might be added. tion in prices across a portion of the mar- Initially, few firms reportedly took advan- ket, most observers believe that it has not tage of the wellness rebate; however, with c. Lower-Cost Limited Networks maintained a price advantage. the rebate not actively marketed until early The second way that Connector offi- 2012, it is too early to judge its impact. cials, and at least two insurers, believe Several interviewees (including one the Connector offers lower prices is Connector board member) felt, however, Most insurance brokers and other market through its ability to attract to the com- that this apparent cost reduction was not participants believe that the wellness sub- mercial market new insurers that have entirely real. In their view, the Connector sidy will have a negligible impact. They more limited networks of providers. Some still incurs the administrative and sales noted, with near unanimity, that the eligi- of these insurers mainly use safety-net costs that the employer fee funded, and bility criteria for the program are too strin- hospitals and community health centers so these costs are being shifted to a differ- gent to make it widely available or attrac- that focus primarily on serving lower- ent part of the market rather than being tive. Some of the reasons for the wellness income patients covered by Medicaid or eliminated. To defray these costs, the subsidy’s limited impact echo those given by the Connector’s subsidized CommCare Connector charges insurers an administra- for the federal tax credit (Kingsdale, coverage. Such plans charge prices that tive fee of 2.5 percent for groups and 3.5 2012)—that the rebate percentage phases are 20 to 30 percent below those of the percent for individuals. Insurers spread down rapidly for firms with more than 10 market leaders. Before the advent of the the fee over the premiums they charge employees and with average wages more Connector, several had not offered private outside the Connector via their market- than $25,000; the rebate reduces employ- coverage (although some had), and even wide community rates. ers’ existing tax deduction for insurance now, several of them sell mainly through premiums, further reducing its value; the Connector by refraining from pay- the incentive does not apply to the busi- ing any broker commissions for sales Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 6 outside the Connector (Kingsdale, 2012). ever, were not initially available through products, which lack the out-of-network Most notably, Neighborhood Health the Connector, leading many brokers to feature needed to enroll people living in Plan, which is based in community health complain that the Connector was “stifling bordering states. centers, has increased its share of the innovation.” In response, the Connector Connector’s private (mostly nongroup) invited insurers to include more limited Other insurers and observers, however, coverage from 19 percent in 2008 to 43 networks in their 2013 plan offerings. said that standardization of benefits percent in 2012, which is twice the share was not a major problem despite some of the next-largest insurer participating in d. Benefits Standardization and “quibbling” and “whining and gnashing CommCare. Innovation of teeth.” They agreed that simplifica- Some interviewees also felt that the tion of benefit options is essential if the Several brokers and employer representa- Connector did not offer sufficient choice Connector is to sell directly to individu- tives acknowledged the potential appeal of higher-deductible plans designed to fit als; too much choice “can be numbing,” of offering lower-cost networks through with health savings accounts or of other causing people to “freeze like deer in the the Connector. Nonetheless, most of the forms of lower-benefit options. However, headlights.” Several sources said that the insurers with limited networks have gained the leading insurers in the Connector Connector’s decision on how to standard- only a modest foothold in the Connector. opposed the Connector’s allowing their ize benefits grew out of a “collaborative” A number of brokers said that they are competitors to offer only limited-benefit process that relied heavily on input from reluctant or refused to recommend insur- or limited-network options for fear that insurers. Even so, to encourage innova- ers that are less established or recognized, such an offering would pull in only bet- tion some insurers and brokers sympa- in part because brokers are less familiar ter risks and leave the leading insurers thetic to the need for standardization for with these insurers and do not have work- exposed to adverse selection. Moreover, most Connector products still felt that ing relationships with their sales and cus- many of the criticisms about excessively insurers should be allowed to offer one tomer relations staff. Some brokers also rich benefit options appear directed to or two nonstandard options that sell well were concerned about recommending an the state’s “minimum creditable cover- outside the Connector. They explained insurer whose network does not include age” standards, which apply market-wide that, although Massachusetts historically the major teaching hospitals in Boston and eliminated so-called mini-med plans. has been a rich benefit state, this is chang- affiliated with Harvard and Tufts medi- These coverage requirements are not ing rapidly with most small groups now cal schools. They feared that subscribers unique to the Connector, but interviewees “crossing the Rubicon” into high-deduct- would complain if they could not access tended to blame the Connector for them ible plans. preferred specialists or facilities when fac- because it is the regulatory authority that ing a serious health problem. set the minimum standards. Taking note of these criticisms, since 2010 the Connector has offered high-deductible Somewhat paradoxically, other brokers, Within the Connector, the inability to plans that qualify for tax-sheltered health and sometimes even the same brokers, offer innovations in benefits design has savings accounts, although deductibles complained that the Connector cur- been a “sore subject,” according to some are capped at $2,000 for individuals and rently does not include some of the newly insurer representatives, given that innova- $4,000 for families, substantially below emerging limited-network plans now tion was originally one of the Connector’s federal limits. More recently, the Connector offered by the top insurers in the mar- “mantras.” One insurer took advantage of announced that, beginning in 2013, insurers ket. In response to increasing complaints the Connector’s invitation to innovate by may offer one or more restricted-network about high insurance costs for small creating a coverage option that combined products that cover the standardized bene- employers, the Massachusetts legislature a high-deductible structure for specialist fit plans, which one insurer will do in 2013, in 2010 required all established HMOs care and hospitalization with first-dollar and may propose one or more innovative (those with more than 5,000 individual coverage for primary care. This insurer nonstandard benefit options, which several and small-group lives) to offer a lim- believed that its innovative product was insurers have done. ited- or tiered-network option priced at popular, but, based on focus groups, least 12 percent below their standard full- the Connector determined that offering Interestingly, the absence of non-health network products.4 In response, several a lot of options was too confusing to products in the Connector was not a mat- of the state’s leading insurers recently individuals and so it required this insurer ter of concern for most brokers. Brokers began to actively market such products, and others to eliminate all nonconform- often arrange “ancillary” products and attracting notable interest from brokers ing plans.5 Several brokers also noted services for employers, such as optional and employers. These new products, how- that the Connector primarily offers HMO Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 7 life, dental, disability, and long-term care the greatest thing, they loved it”—a senti- ers “just want something credible” and insurance and flexible spending accounts, ment confirmed by several others. “simple” and “don’t want to take the time 401(k) plans, and the like. Outside the to figure out” something complicated. Connector, vendors provide “one- Other choice proponents saw potential Given that employee choice involves a stop shopping” for a suite of employee for a “defined contribution” model in different way of doing things that is not benefits, but the Connector does not. which employers give workers a voucher easily understood, employers and brokers However, brokers almost uniformly said for a fixed amount to be spent on health tended to “approach [this new idea] with that they are well equipped to package insurance any way workers prefer, but caution,” according to one highly experi- health insurance from one source with these proponents complained that the enced market participant. ancillary benefits from another source and Connector eschewed a genuine version often do so in any event, even when not of this model. Instead, the Connector Inherent complications are noted below. using the Connector.6 required (as noted below) that employers As to whether choice matters, skeptics select a reference plan and agree to pay felt that differences were too minor 2. Enhanced Choice at least 50 percent of its premium, with among the covered benefits and net- Aside from price, the other main way employees then allowed to pick alterna- works offered by the leading insurers the Connector seeks to improve market tive insurers or plans only within the same for choice to be very meaningful. “It’s options for small employers is to offer a benefit tier. a facade of choice,” in the view of one superior mechanism to shop for coverage. broker, because the benefit options and For all its programs, the Connector touts It was noted in response to these objec- most of the major provider networks are the ease of making online, side-by-side tions that the Connector’s reference plan the same. An employer representative comparisons of insurers’ prices and ben- model was based on Connecticut’s highly objected that employees were allowed to efits – which contrasts with the confusion successful private exchange (Connecticut choose only within a tier, even though and complexity of shopping insurer by Business and Industry Association). In “vertical choice” among benefit tiers is insurer in the regular market. In addition, addition, it is not immediately obvious more important than “horizontal choice” the Connector attempted to enhance the why variations from a pure defined-contri- among insurers with similar benefits. degree of choice available to workers in bution approach would necessarily weaken Or, as a broker put it, he would prefer a small firms by piloting its Contributory the appeal of individual employee choice. “Willy Wonka elevator,” one that does Plan, as noted above. In the pilot, two-thirds of workers ended not go merely side to side (within a tier) up staying with the reference plan selected or up and down (across tiers) but that also a. Employee Choice by their employer rather than selecting a allows shoppers to “zig and zag” in both We begin with a focus on the special fea- more or less expensive option. Therefore, dimensions. tures of the Contributory Plan. A variety as one knowledgeable source said, per- of explanations were given, repeatedly haps the employee choice idea was sim- b. Complications and by different sources, for why this ply “ahead of its time”—something that A related but counteracting concern, pilot was not successful. Most basically, most employers and workers did not fully shared by several brokers, is that the sources were skeptical about the degree appreciate because they were so accus- employee choice feature required much to which employers actually value letting tomed to the idea of employers picking a more effort to explain to employers and workers choose their own coverage. In single broad network for the entire work- workers than does simply selling a single favor of choice, some brokers, employer force (see also Fronstin, 2012). plan to an employer. As one broker put representatives, and other observers felt it, “How many conversations do you want that employers would prefer employee Others, however, believed that while indi- to have to help everyone figure this out” choice once they experienced it, but vidual choice is a “noble aim” and “inter- for just $10 a month per worker? This Massachusetts employers were not yet esting concept” that “sounds [like a] fan- broker thought that employee choice used to the idea and therefore were initial- tastic” idea that could “completely revolu- might be a good feature if “there were a ly not strongly drawn to it. Sources noted tionize the market,” in practice employee way to pay for advising employees” about that, among employers who did enroll, the choice is either inherently too complicated how to make their selections. Absent that, reported level of satisfaction was very high or is not sufficiently meaningful to make a when employers want to offer employee (Lerna, 2009) and that employers who real difference. According to doubters, the choice, he prefers to set up a tax-sheltered signed up have tended to remain with the employee choice option is, at best, only a health reimbursement account (HRA), product longer than normal. According to “niche product” that will never capture a which takes the employer out of the role one senior employer representative, some large segment of the market. One experi- of choosing or sponsoring a health plan. employers thought that this program “was enced source said that most small employ- Employees can use the HRA to purchase Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 8 coverage from whatever insurer they want. nificant time understanding and explain- For these reasons, one leading insurer In contrast, the Connector’s approach ing these complexities, which they found conceded that employee choice “scares the conveyed the sense that the employer, “exasperating,” according to a Connector you know what out of us.” Several sources and hence the broker, was responsible for source. noted that, to “assuage” this “paranoia” helping employees decide which insurance and “big bugaboo” over adverse selection, option they should select. In addition, when employees found out (by the Connector agreed to control the pro- talking among themselves) that employers gram’s size and profile by conducting it as Another complication of the Connector’s were requiring some workers to contrib- a limited pilot. Otherwise, some or all of pilot program is that that an employer ute more than others to health plans that the leading insurers would have refused to might not know the exact amount of its basically were very similar, workers were participate. This accommodation brought contribution until workers make their understandably upset. The disparity arose the leading insurers on board “only grudg- selection. Employees’ precise age-mix not only because some employees selected ingly” (according to several sources in so determines the group’s base premium less expensive coverage, but also because many words), but it meant that the pilot under community rating rules that allow those who selected alternative coverage operated “with three hands tied behind our two-fold variation based on age.7 For paid a premium contribution determined back,” according to one Connector official, the choice model to function properly, it by their age rather than by the company’s or “with one foot in the grave,” according requires “convoluted” pricing calculations, composite rate that applied to the blended to a benefits consultant. which “you need a Ph.D. to understand.” ages under the reference plan. According Age rating creates greater complexity in to Connector officials, this bifurcated For instance, the program’s pilot status an individual choice model due to the key approach to age rating was partially a meant that it was not advertised. Moreover, difference between “composite rating” and response to concerns among some board the Connector made the pilot available to “list billing.” Conventionally, employers members that pure list billing would result only about 20 brokers instead of open- in many (but not all) states receive a com- in age discrimination. However, officials ing it to the market as a whole, in order to posite rate that reflects the blend of ages despaired that mixing composite with list limit the program’s size and focus training in their covered workforce at the time that billing in this “overly engineered” fashion efforts. To avoid unfairness to nonpartici- workers sign up. The result is that neither “really mucks up the works” in ways that pating brokers, however, participating bro- the employer’s nor the employee’s contri- “become very difficult to explain to anyone kers could enroll only their existing clients bution varies according to age. Composite who is not an actuary.” 8 rather than using the Contributory Plan to rating works when an insurer enrolls “poach” new business from other brokers. the entire group, but not when workers c. Adverse Selection Such an arrangement kept brokers from can select different insurers. Then, each Other problems with the Contributory promoting the new program to gain new insurer will want to bill separately for Plan related to the fact that it was a pilot business. Moreover, they realized from the each worker, according to the worker’s program, which, according to some former outset that the pilot might not be continued. age – which is known as “list billing.” Not Connector officials, “doomed it from the only does list billing make the employer start.” It was introduced as a limited test in By design, then, the pilot program was more aware of inherent cost differences order to overcome strong objections from never intended to enroll large numbers. among workers, but employers also face some of the major insurers, including Blue The initial hope was to enroll 100 firms the dilemma of whether to make different Cross. They feared that they would experi- with 1,000 workers (over no specified time employees contribute different amounts to ence serious adverse selection if employees period). But, after almost a year, the pilot their insurance premiums. were allowed to opt out of the reference ended up enrolling only 77 employers with plan selected by the employer. Blue Cross 207 workers (or 388 people, including fam- List billing is an established market prac- based its concern on its experience in the ily members). tice in a number of states, though not in nongroup segment of the market, where Massachusetts. The Connector attempted it documented receiving enrollment with a An additional reason the pilot failed to to mediate this “dicey” issue by using a significantly worse risk profile than in its do better is that concerns about adverse blended composite rate for all workers small-group segment. Blue Cross, along selection caused Blue Cross, the market who selected the employer’s reference plan with some of the other leading insurers, leader, to charge 10 percent more through but using list billing for those who selected reasoned that sicker individuals tend to the Connector than in the outside market. alternative plans. This solution created choose plans with the broadest networks Despite community rating rules, it was two problems. Employers found the mul- and that healthier patients opt for cheaper allowed to do so because the state allows tipage billing statements “really confusing” limited networks, leaving larger insurers insurers (until 2014) to use a group size such that their brokers had to spend sig- with the “worst of the litter.” factor in their community rates in order Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 9 to capture the element of adverse selec- “paternalistic,” “lefty” members of the the Connector to obtain side-by-side com- tion that inherently attaches to choices Connector board, who they felt were parisons, on an apples-to-apples basis, of made by smaller groups.9 Given that the philosophically opposed to moving in plans offered by all the leading insurers. A employee choice model slices already the direction of defined contribution by recent New York Times article highlighted small groups into even smaller units employers. this issue. It contrasted one Massachusetts (“twosies and threesies”), Blue Cross (and business owner who found it “astound- other insurers) had regulatory author- Coupled with this lackluster reception ingly complicated” to shop for coverage ity to add the 10 percent surcharge, was a different opportunity presented to outside the Connector and so “ultimately which would obviously tend to discour- the Connector in late 2009 to jump start gave up trying” because it “was impossible age its customers from switching to the a critical mass of enrollment by transfer- to compare plans” with another individual Connector. ring SBSB’s existing block of business to (nongroup) shopper who said that the the Connector. As noted, the Connector Connector’s website was “super-easy to Despite these concerns, adverse selection contracts with SBSB to administer its take a quick look and figure out which did not materialize in the limited pilot unsubsidized private insurance programs. price range we wanted . . . and then dive (although it was too short-lived to draw SBSB is one of two large “intermediaries” down deep into one or two of them.”10 strong conclusions from the experience). in the market that enroll the majority of An evaluation conducted after the pilot’s employers with fewer than 6 workers. To Insurance brokers and employer represen- first year found that average ages were consolidate its dual role, SBSB was will- tatives did not share this enthusiasm, how- virtually identical for those who kept the ing to transfer its 17,000 subscribers to ever. Instead, brokers in particular repeat- employer’s reference plan and those who the Connector, and the Connector was edly voiced the following complaints. selected an alternative (Ierna, 2009). In eager to receive this bolus of enrollment, First, they felt that they are sufficiently addition, of the 35 people who selected an in part because it was under increasing equipped to present informed shopping alternative plan, about half selected some- “political pressure” to show the governor choices to their employer clients by using thing more expensive, and they were not tangible results in “delivering something their own tailored spreadsheets based on substantially older than those who opted to employers.” information they obtain directly from for less costly coverage. The pilot’s expe- insurers. Given that most small employers rience does not conclusively resolve the For SBSB to transfer its existing groups purchase insurance through brokers, bro- adverse-selection issue because risk status to the Connector seamlessly, however, the kers’ expertise greatly mitigates the com- was assessed only through crude demo- Connector had to conform its small-group plexity of navigating the market and thus graphics and not through actual costs, dis- program to the existing structure in the the Connector’s comparative information ease burden, or care utilization. In addi- outside market. This meant abandoning advantage. tion, adverse-selection patterns may take the employee choice features, regardless longer than the pilot period to emerge. of how well or poorly the pilot might be Second, brokers noted that they would Nevertheless, the Connector’s assessment seen to have gone. not be doing their clients justice if they found that the pilot succeeded in avoiding abandoned their spreadsheets and relied the problems initially feared. e. Employer Shopping only on the Connector. Thus, even if Along with providing employees a choice the Connector’s portal might be simpler d. A Change of Heart of plans and making it easier to compare and more complete, it presents—from a With the only thing to fear being fear plans, the Connector seeks to improve broker’s perspective—an additional layer itself, why did the Connector not convert the shopping process for employers. Even of work rather than a means to simplify the pilot into a full-scale program, with though it offers a similar array of insur- the broker’s search efforts. Even brokers an ambitious advertising campaign like ers and products to those available in the who use the Connector said repeatedly the one that successfully launched its broader market, the Connector aims to that this ends up being “more work for other, individual-enrollment programs? make key comparisons among products less money” because they continue to In the end, no important constituency more transparent in order to facilitate also obtain quotes and explore benefit was enthusiastic about the idea. It “just competition. For the smallest employers, options directly with insurers and the pri- wouldn’t be worth it” to undergo the some degree of comparison shopping was vate intermediaries. As explained by one “headache of fixing it,” according to available before the Connector existed, via broker who is in favor of the Connector, several sources. In addition to the tepid the trade association intermediaries noted “My business is finding the smallest of response from employers and the resis- above. However, Blue Cross does not deal advantages for my customer” such that he tance or opposition voiced by insurers and with these intermediaries, and the product compares Connector options with the rest brokers, several interviewees pointed to offerings are not standardized. As a result, of the market to see where he might save the social views of some “pro-consumer,” without a broker, it is not feasible outside 1 or 2 percent. “That’s all more work, but Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 10 I love” the challenge. Other brokers, how- Regardless of the justification, brokers cratic hurdles are imposed by insurers, not ever, seemed to resent the “extra work” objected that this kind of information is by the Connector. For instance, selling of shopping the Connector alongside the not required to obtain quotes elsewhere group coverage to a sole proprietor often regular market. and that demanding this level and type requires extremely thorough (or “crazy”) of information from employers simply documentation that the person operates a Brokers further noted that there is a great- to give them quotes is not a good way to legitimate business in Massachusetts, but it er diversity of plan types and coverage solicit business from a new client. Several is wrong to blame the Connector for these options available outside the Connector, brokers also criticized the Connector’s demands imposed by insurers. Insurers and so providing thorough advice requires renewal process for being much more themselves did not complain about, or continuing to search outside options. cumbersome than renewals done directly were not aware of, any problems with the Thus, they saw the Connector’s standard- with insurers. The Connector reportedly Connector’s online interface and how its ization of benefits as a disadvantage. Even requires detailed information to be re- TPA services accounts, despite their sig- though standardization facilitates head- entered anew each year rather than assum- nificant stake in these matters. to-head comparisons, brokers see value ing continuity of the workforce unless in having as many options as possible changes are noted.11 Some brokers noted that views differ for them to help employers sort through. depending on how comfortable brokers Several touted the fact that, outside the In addition, many brokers complained and employers are with using a computer Connector, they can search through up to that the Connector’s website at times online for complex and important mat- 80 plan options. did not function well or that they could ters, in contrast with “older brokers” not receive the assistance they wanted by whose secretaries “do the paperwork.” f. Service and Information Technology telephone. According to several brokers, One broker, for instance, said that “trying Issues after entering lots of information the web- to make [insurance selection] computer Finally, brokers complained, some- site would freeze and all the information driven just makes you deeply confused,” times bitterly, about “cumbersome,” would need to be entered again, simply even for “doctors and lawyer clients . . “inept,” and “antiquated” features of the to obtain a quote. In addition, when bro- . forget about plumbers, electricians.” Connector’s shopping interface (admin- kers needed to speak with someone on Another broker noted that some clients istered by SBSB) that made it more dif- the telephone, several complained that do not have the ready access to com- ficult, not less, than dealing with insurers the Connector’s TPA initially was “hor- puters needed to take advantage of the directly or through the existing intermedi- rible” because it was much harder to Connector’s systems and so they still need aries. According to a more charitable view, reach than staff with insurers (“awful”, live customer service after hours (when the Connector’s plan comparison systems 45-minute wait times) or that TPA staff they are not at work). In contrast, other function well enough, but their systems could not answer basic questions and brokers said that most of their business are “just not what we’re used to” and take “were hard to work with,” at least at the and client interactions take place via com- some time and effort to learn. outset. Some brokers complained that the puter, which they and clients “love.” One division of various functions and respon- broker who has placed a fair amount of One feature that drew complaints is the sibilities among the Connector, its TPA, business with the Connector noted that, Connector’s “nightmare” requirement that and the insurer “can be very confusing” although aspects of the experience can be brokers (or employers) enter tax identifi- as compared to dealing with an insurer frustrating, once employers sign up, most cation numbers and employee demograph- directly. Further, several brokers said that of them remain because they have fewer ics before receiving a quote, which also they value the “certain type of access” “hassles.” requires the broker to have a unique pass- they have when they are able to “pick up word for each group. A Connector official the phone” and reach the right insurer Overall, as one Connector official explained that these are requirements that representative able to deal directly with a summed it up, “Until you work in the some insurers insist on, to make sure that client’s problem rather than going through guts of health insurance, you don’t real- their quotes are accurate, given that rates an intermediary. ize” that the operational complexity of the depend on age, location and industry cat- group market is “10 times harder” than egory. Another explanation is that Blue Not all interviewees shared these nega- the nongroup market, and so it’s a “step- Cross in particular insisted on this level of tive views, however. Some brokers noted wise process” in which “you can’t achieve extra detail in order to determine whether significant improvement over time in perfection on day one.” Accordingly, its existing clients are considering a switch service and website problems. According one partially sympathetic broker opined to the Connector and thus possibly to to one, the TPA and Connector staff are that “we we should cut them some slack their competitors. “easy to work with, really smart, on top [since at least] their heart’s in the right of things, very responsive and helpful.” place.” Another broker agreed with col- Another noted that some of the bureau- leagues that there had “been some hic- Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 11 cups along the way,” but, on the whole, bode well for likely attitudes in other but, as Connector officials conceded, the Connector has “actually done a good states. marketing the employer component has job”—a view echoed by a well-informed been virtually “nonexistent.” The reason former government official who thought Two business group representatives felt is that the employer component initially that “it’s a real testament to everyone that employers were somewhat reluctant opened as a pilot program. Then, just [involved with the Connector] that they to deal with the Connector as a govern- after the launch of the revised employer could find middle ground of some kind” ment agency, but another long-time program, all the leading insurers withdrew between all of the competing consider- employer representative thought the small for two years (as explained below), and ations entailed in figuring out how to business community realizes that it lacks the Connector did not want to market a “differentiate itself in the market without the market clout of large business and program that did not include them. With being a threat” to insurers and brokers. is seeking the government’s help to rein the major insurers rejoining in 2012, the That’s “not an easy dilemma to solve.” in costs. Several other knowledgeable Connector began active marketing, just at sources said they had not noticed any the time interviews were being conducted C. Political, Institutional, and indications of employer “hostility” to the for this study, and many interview sub- Miscellaneous Factors Connector and that many employers were jects had heard or seen these ads. At the Even if the Connector did everything just at least willing to “take a look at it” to see same time, however, there was also active right and offered superior choice at a bet- if it offers better value. marketing by a new, competing private ter price, its success might be foiled by purchasing cooperative operated by an opposition from key constituencies based Indeed, several sources said the employer trade group, which tended to on political, economic or institutional fac- Connector has a highly favorable repu- steal some of the Connector’s thunder. tors. The Connector, after all, is a quasi- tation in the general community based governmental agency that exercises regula- on how effectively it has overseen and 2. Insurers’ Views tory authority, and many business people implemented the Massachusetts health a. In General are hostile to government regulation or reform law. According to one benefits As just mentioned, in early 2010 the take a dim view of the competency or advisor, “People are pretty amazed about market’s 4 largest insurers, representing propriety of government entering directly what they were able to accomplish in a 90 percent of the small-group market, into the private market. Many insurers short period of time.” Others said the suddenly withdrew or refused to join the might naturally resist efforts to change Connector has a lot of “credibility,” and at second iteration of the Connector’s small- the basis on which they compete. Brokers least some employers respect the “seal of group program, a month after its launch. might view the Connector as especially approval” it confers on the plans it offers. This crisis, which many people called a threatening since, if it were to succeed in One key source thought that employers “boycott,” occurred at the same time as vastly improving the shopping process, view the Connector more favorably than it the governor’s high-profile decision in employers might no longer need brokers. deserves by wrongly assuming that it pro- March 2010 to deny outright any rate On the other hand, some insurers and vides a subsidized rate for private insur- increases for most of these insurers’ small- brokers might welcome the Connector as ance. According to one broker, when she group products. This decision hit “like a a vehicle for gaining a better market foot- talks to employers about the Connector, meteor” on the eve of the annual renewal hold. Interviews explored whether and to they often think that she is suggesting that date for many Massachusetts groups (typi- what extent views such as these prevailed. they join a Medicaid-type program—a cally April 1). Blue Cross attributed its false notion that takes extra effort for her nonparticipation in the Connector’s new 1. Employers’ Views to dispel with clients. small-group program to needing more Among employers, there were only mod- time to work through the necessary sys- erate signs of “knee jerk” resistance to Rather than negative impressions of the tems changes with the Connector rather the Connector based on its governmental Connector, interviewees more often men- than to a response to the governor’s rate auspices. A statewide survey that found tioned employers’ general lack of aware- freeze. Regardless of the reason, when that only a third of small employers would ness. Confirming this, an employer survey Blue Cross refused to join the revised be “uncomfortable” buying health ben- conducted by the state each year reported program, the other three leading insurers, efits through the Connector “because it is that, in 2010, only 44 percent of employ- according to multiple sources, also left a quasi-governmental agency” (Gabel et ers offering health insurance were familiar and would not return until Blue Cross al., 2008).12 Several sources noted, how- with the Connector (and only 37 percent agreed to do so, two years later. ever, that Massachusetts generally is more of those who do not offer insurance). receptive to “big government” than other Several people praised the Connector’s It is understandable that major insurers states. Therefore, any sign of resistance “innovative and creative” marketing of its would refuse to play ball with a gov- based on government “stigma” does not nongroup and subsidized components,13 ernment that abruptly denied any rate Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 12 increase for small groups. It is less obvi- rules” appears to have some foundation. from Blue Cross’s competitors, but not ous why none of the other insurers would According to observers, solidarity among from Blue Cross, because Blue Cross’s re-enter until Blue Cross was appeased. leading insurers meant that the Connector policy has been to sell its small-group cov- With Blue Cross accounting for the largest had to come to terms with Blue Cross erage directly (and through independent share of a highly competitive market, one over numerous, sometimes “maddening,” brokers). Given Blue Cross’s larger market might have expected that business rivalry operational details. If Blue Cross “would share, it could afford to invest in the sys- would cause one or more insurers to not play,” neither would the others. This tems and personnel needed to service very break rank in order to seize some of Blue created the impression among many that small accounts directly. It prefers to do Cross’s market share. leading insurers, including Blue Cross, this rather than turn these key roles over “mounted an organized campaign” to to a third party, whose handling of matters Interviewees provided several explanations. resist the Connector’s employer program affects customer relations and brand iden- Several people recited by rote the mantra “every step of the way,” in ways that tity. Other leading insurers had decided that that, as the “800 pound” market leader, when “just made [the Connector’s] life miser- it was more economical to outsource ser- Blue Cross does something, “everyone else able.” Two interviewees said that insurers’ vice for all of their groups of five or fewer takes notice.” A couple of people speculated objections often were only “smoke and to intermediaries such as SBSB. These that, under a dynamic where the largest plan mirrors” because some objections voiced insurers sell to such groups only through tends to experience more adverse selection, it about the employer program were not intermediaries, and never directly. may be that no one else wanted to be at the heard earlier about the nongroup pro- front of the firing line, especially considering gram, and once one issue was resolved, Despite this competitive alignment, the that the Connector generally attracts only the “there would be two other” new ones. Connector hired SBSB to administer its smallest groups, which tend to be higher risk. private insurance programs because it As a source at one insurer admitted, faced Observers speculated that Blue Cross “didn’t needed a firm with the experience and with the risk of adverse selection, “We felt want to play” because “they were fat and established relationships with most of the that if Blue Cross isn’t going to play nice, we happy the way things were” and could only market’s health plans. Also, the reform law can’t be the only ones who play nice.” lose from the Connector’s new approach. required the Connector to use an adminis- Some informed sources found Blue Cross’s trator domiciled in the state. Blue Cross did The most convincing explanation was position reasonable, noting that Blue Cross not object to SBSB’s role in administering simply that none of the leading insurers has substantially less market share inside nongroup coverage, but it was not willing is especially eager to participate in the the Connector than in the rest of the mar- to cede some of its administrative func- Connector. “They would all just as soon ket and that people who change insurers tions to SBSB for its small-group business. the Connector just go away,” accord- are probably better risks, on average, than Moreover, it felt that it was unfair to have ing to one board member—a sentiment those who remain with a given insurer (a to pay a service fee to the Connector to echoed in interviews with at least one general phenomenon known as adverse help support its SBSB contract for services insurer. This insurer explained that it ini- retention). The same sources felt that this that duplicated what Blue Cross already tially joined to be sure not to miss out on attitude is not peculiar to Blue Cross since provided to small groups and that it did a possible change in the market, but now it would likely be shared by any dominant not want to relinquish. that it sees that the market has remained insurer. Several others noted that Blue Cross largely the same, it feels “stuck.” This and deserves some credit for helping bring about This uncomfortable alignment spawned other insurers intimated that they deal the state’s health care reform law in the a host of technical issues that were dif- with the Connector in large part in order first instance and that, more recently, Blue ficult to resolve, that delayed Blue Cross’s to be a “good corporate citizen” and Cross has become more cooperative with re-joining the small-group program, and because it would be “political disaster” the Connector, under the leadership of its that still bedevil the program to some if they did not. But, with Blue Cross car- new CEO and president, who is “true to [the extent. For instance, one key to providing rying the most political and institutional nonprofit] mission” and wants to “do the accurate quotes to insurance shoppers is weight in the state, other reluctant health right thing.” direct access to each insurer’s rating crite- plans felt that they were safe to demur ria, which determine how much rates vary until Blue Cross rejoined. Another explanation for Blue Cross’s reluc- by allowable factors such as age, location, tance is the role of SBSB, the Connector’s business sector, and group size.14 Other b. Blue Cross contracted administrator for private insur- insurers were already used to sharing such For these several reasons, the view, fre- ance. As noted, “part of the strange stew” competitively sensitive information with quently heard, that Blue Cross’s influence in Massachusetts (in the words of a knowl- SBSB, but Blue Cross was not. Dealing “as the big kid on the block” is such edgeable observer) is that SBSB and Blue with these “control issues” required “cum- that “it can call the tune” and “set the Cross are competitors. SBSB sells insurance bersome” work-arounds behind the scenes Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 13 to allow Blue Cross’s small-group prod- health,” which is why, brokers stressed, that market.16 But, originally this was not the ucts to be quoted alongside its competi- even sophisticated business owners prefer to case. Moreover, many brokers reported tors, according to various sources. rely on the expert judgment of a broker they that, even with similar commissions, there know personally. is no especially strong reason for them Such complexities are not unique to the to use the Connector. With equivalent Blue Cross and SBSB situation. According Since its inception, the Connector has premiums and fewer options, broker to Connector officials, employer exchanges sought to include brokers, but brokers had after broker said something to the effect have to come to grips with many business reason to be wary of what they viewed as that “the Connector can’t give [brokers] rules that might affect profits, costs, or a “Trojan Horse” or “camel’s nose under a single solid reason to do business with perceived fairness, and, for each issue, vari- the tent,” trying to “put us out of busi- them” rather than dealing with insurers ous insurers may prefer a different rule or ness.” First, if the Connector were to suc- directly. Accordingly, most brokers inter- practice. Examples include the minimum ceed, brokers feared the Connector would viewed have never written a single piece employee participation and employer con- eventually “disintermediate” them—if of business with the Connector, including tribution rules for various-sized groups, not by excluding them outright, then by several who are on the Connector’s Board how to validate information in applications, charging employers extra for relying on of Advisors. how soon to cancel insurance for nonpay- them. To compound the fears of being ment, and when and how much enrollment “thrown under the bus,” Connector The only possibility for greater broker can be retroactive. Substantial sums of officials initially were not perceived as enthusiasm mentioned by interviewees is money are at stake, and each insurer has “particularly broker-friendly.” Until this that younger and less well-established bro- its own procedures in place. Therefore, it year, the Connector did not have a broker kers might view the Connector’s unique is a “challenge” to keep insurers all “at the on the governing board, and other board features (including its wellness tax credit) table” working to find consensus around a members and key Connector personnel as a good “calling card” to use in solicit- common approach. The Connector’s suc- were thought to be dismissive of the role ing new business. One such broker who cess in doing so appears attributable, in or value of brokers. Even under a more had placed business with the Connector part, to its adopting the approaches that charitable view, the initial Connector lead- thought that it has good ideas about how most leading insurers were already using in ership had “good people with good inten- to structure choices for small employers, the outside market. tions, but they just didn’t come over that ones that only need “a bit of tweaking.” well with the [broker] community.” But, other observers noted that the health 3. Brokers’ Views insurance agency business is contracting Next, we come to the critical perspective of Another reason for broker resistance is and so few new people are entering it. independent insurance brokers (also known that the Connector initially paid them a sig- as agents). It has been widely noted that nificantly lower commission than brokers Despite generally dismissive attitudes, brokers are pivotal to the success of group received in the regular commercial market. brokers claimed that they do not steer market structures because the great majority The Connector determined that it could clients away from the Connector or avoid of small employers rely on them for advice afford only 2.5 percent as compared with it at all costs. Instead, they see their role about purchasing insurance (Gardiner, 2012; the 3.5 to 4.5 percent previously paid in the as offering employers the best value avail- Hall, 2000).15 Small employers lack the exper- commercial market. In the past year or so, able regardless of what earns them the tise or human resources staff to deal with however, insurers have reduced their pre- most money. It is possible to take such fringe benefits issues and so brokers often vailing commission rates to a level similar self-serving assertions with a certain grain serve this function on an outsourced basis, to the Connector’s in response to pressure of salt, and some brokers volunteered paid by commissions. An employer represen- on their profit margins from increased gov- that not all of their colleagues are as tative noted that, even using the Connector’s ernment scrutiny of their premium rates. public-spirited as they themselves were streamlined website presentation, there are And, in one respect, the Connector pays professing. Nevertheless, most brokers still too many choices for employers to feel more: it pays $10 a month commission for appeared genuinely open to hearing what that the Connector has “taken the guess- sole proprietors, whereas insurers pay no the Connector had to offer and seemed work out of the decision.” Brokers also commission for this business. Although sincere in their explanation that they had emphasize that, in addition to complexity, that amount is low, some brokers view $10 taken a close look on behalf of clients evaluating health insurance is more than as “better than nothing,” enough to “make and would be willing to recommend the simply a “spreadsheeting function”; it is also a meager living.” Connector if it offered superior value.17 worrisome because making a wrong deci- Many brokers also praised the Connector’s sion could jeopardize someone’s health or Thus, on balance, most brokers felt that current administration and leadership for life, including the business owner’s. “You’re the Connector’s commissions are now reaching out to their community in con- not buying a car or furniture. It’s called your roughly equivalent to those in the outside structive ways and were grateful that the Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 14 Connector had recently added a broker 4. Connector’s Mission that most insurers had neglected under the to its Board of Directors. And one leader Emotions aside, brokers, level-headed and state’s earlier community rating laws. With in the broker community praised the hot-headed alike, along with insurers, articu- the small-group market functioning com- Connector for its “good job of consumer lated one overarching theme: there is no paratively well on its own, the Connector advocacy, fighting hard for clients.” justification for the government to expend naturally saved that market segment for substantial resources on the small-group last and therefore did not implement a All that said, “nine out of 10” brokers, market in a “disruptive” manner that does small-group program until its third year. by one account, still do not like the not significantly lower prices or improve Even then, the program was not marketed Connector, and those interviewed gave a product options. According to various indus- because it was still in its pilot phase (for long list of reasons (already noted) why try sources, the Connector “spent a million reasons explained above). the Connector does not offer better value dollar marketing budget” “to compete with than the regular market. In addition, bro- brokers” “for something that’s already in the Marketing to small groups began in earnest kers resent that they “got stuck with” a marketplace” “just because the governor said in early 2010, when the small-group program lot of “non-revenue producing activity” we had to do something.” On balance, its was restructured into Business Express, but required by the reform law in general, employer programs were “much ado about the marketing campaign included the explo- which the Connector is charged with nothing,” “a lot of smoke and mirrors to sive letter described above. Unluckily still, enforcing (beyond merely its role as an duplicate what we already have.” But the the letter was soon followed by the precipi- insurance exchange).18 “law says we shall, so we shall.” tous exodus of the market’s leading insur- ers, perhaps sparked by the governor’s rate Some brokers were openly hostile to the These sources acknowledge the need for the freeze. Without these “brand name” insurers, Connector. As justification, they cited a Connector to arrange subsidized coverage the Connector largely suspended its employ- letter that the Connector’s original direc- for the uninsured and to structure unsub- er marketing efforts until early 2012, when tor wrote to all 170,000 small employers in sidized private insurance for individuals,19 the leading insurers rejoined. Therefore, a the state, announcing the opening of the but, with 97 percent of the state’s residents full-throated presentation of the Connector’s revised small-group “Business Express” insured, they feel that little additional ground small-group program has only recently program in early 2010. The letter refer- is to be gained in seeking enrollees from begun. And, even now, the Connector is cau- enced the reduction of fees (described uninsured employers. Therefore, brokers tious to avoid direct marketing in a way that above) for groups of five and under and believe that any aggressive attempts to might backfire with brokers, as it did before. the availability of lower-cost options increase small-group enrollment will neces- (described above) based on more limited sarily threaten to take away their existing On balance, then, it may be too early to networks not widely available in the regu- business without significantly advancing declare the Connector’s employer programs lar commercial insurance market. It closed legitimate health policy objectives. And insur- a “complete flop” “that went absolutely by encouraging employers to “call your ers wondered “what the point of all of this” nowhere” (as two brokers said). Indeed, broker or go direct to [the Connector’s time and effort has been for something that several informed sources thought that per- website] and enroll on-line.” has “turned out to be a non-event.” Even haps the Connector’s approach to offering some Connector officials and board mem- individual employee choice that included According to multiple sources, the let- bers (former and current) wonder whether more limited networks was just “a few years ter “hit a raw nerve” that made brokers the employer component “was worth all of ahead of the market” while Connector offi- “furious.” The broker community was this attention” and didn’t “border on being a cials stressed that the full-scale small-group vehement that it was unfair for “big gov- waste of time.” program had been operating for only a few ernment” to use its resources to conduct months at the time of this study. such a large mailing in what they felt was The several objectives of health reform a blatant attempt to “undercut” their point to a final institutional factor that III. Applicability to Other States existing client relationships in a manner explains the Connector’s limited success How relevant are these experiences for that “wasn’t telling the exact truth.” “It with small groups. According to many key other states implementing the Affordable became an emotional thing, [the feeling observers and some former Connector Care Act’s Small Business Health Options that] you’re out there to kill me.” Two officials, the Connector properly directed Program (SHOP) exchanges? Despite years later, the letter still “stuck in the its main focus at the outset to launching obvious differences, interviewees con- craw” of some brokers who “just won’t subsidized coverage and implementing sistently thought that the experiences in forget.” Even at the time of these inter- other aspects of the new reform law. Its Massachusetts are relevant beyond the views, Connector officials were starting second priority was to make individual state’s particular reform law and mar- broker training sessions with an apology coverage available in the private unsubsi- ket conditions. One way to reflect this about past “mistakes.” dized market, which is the market segment generalizability is to note the various les- Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 15 sons that informed market participants, Massachusetts, particularly if other states do nongroup component. The Massachusetts observers, and regulators thought could not have intermediaries already in place to Connector also made full participation a be learned from the Massachusetts experi- provide some online shopping features for formal requirement for insurers to sell to ence. Stakeholders from several perspec- comparing prices and benefits. In addition, individuals, but various sources explained tives offered the following advice: Massachusetts had already eliminated medical that the Connector never felt it had enough underwriting, and a handful of HMOs offer- leverage to actually force participation in • Focus on the value proposition that an ing similar networks and benefits dominated the employer component.20 exchange structure can offer the small- its employer market. Several people felt that group market. Do not simply attempt to these features gave Massachusetts a fairly Finally, several people commented that, to replicate the existing market, but rather standardized set of prices and benefits even some extent, the Connector was “ahead consider which of its problems and limita- before the Connector entered the picture, of its time,” and so features that initially tions a SHOP exchange can realistically which might not be the case in states with failed might well succeed if tried again address. Focus the SHOP exchange on a broader range of plan types, benefit struc- or tried elsewhere. In particular, under making those improvements rather than tures, and underwriting practices. If so, other the ACA, the individual choice aspect of attempting to serve multiple purposes and states might have a greater need to simplify the Connector’s initial employer program all market components. the shopping experience. Two interview- would not need to be done on a pilot ees, however, thought that the presence in basis, since the ACA mandates offering • Do not aim for overnight perfection. Massachusetts of some limited-network plans employers at least the option of providing Building an effective exchange for small may have provided more network diversity a worker-choice model. Without the limi- employers is complicated and should such that the state had more to gain than tations of a pilot program, the employer be done in a step-wise progression that other states from a structured clearinghouse. component would presumably be open avoids being too complex or overly to all brokers and thus could be broadly engineered. Other important differences were noted advertised – overcoming some of the between the ACA’s provisions and the Connector’s initial obstacles. Moreover, • Use existing expertise in the market Massachusetts reform law. Most significant is the ACA’s provision for funding naviga- and build on technology platforms that the ACA’s use of a risk-adjustment mecha- tors within exchanges could conceivably insurers and brokers are already com- nism to address adverse-selection problems help address some of the concerns bro- fortable with rather than building every- among competing insurers. Massachusetts kers expressed about the lack of support thing from scratch. lacked this feature, and insurers’ concerns for taking on the extra burdens of explain- over adverse selection hampered its small- ing complex choice and enrollment fea- group exchange. However, a number of tures to employers and workers. • Do not underestimate the influence of brokers and their importance as interviewees commented that risk adjustment advisors to employers, or their store would not fully address insurers’ selection On balance, the Massachusetts of knowledge in contributing to the concerns because risk adjustment is imper- Connector’s difficulties in establishing a successful design and operation of an fect, and they felt that most insurers tend successful employer exchange amply illus- exchange. to be “paranoid” that they will be selected trate the challenges that other states will against in an exchange setting more than likely face in establishing SHOP exchang- their competitors, almost regardless of what es under the ACA. States need to walk • Do not underestimate the difficulties rules an exchange adopts. in reaching consensus with and among a fine and sometimes faint line between competing insurers and in formulating creating a program that improves existing effective operating rules in a way that Another important difference between the market structures for small groups without preserves broad participation and a ACA’s provisions and the Massachusetts unduly threatening existing market par- level playing field. reform law is the ACA’s payment of ticipants or upending features that already substantial subsidies to individuals pur- work reasonably well. As many informed chasing through exchanges; in contrast, sources commented, that is a tall order. Although these lessons learned from individual private insurance is unsubsidized But, if it is to be filled, the experiences in Massachusetts appear to be broadly appli- in Massachusetts. The ACA’s subsidies are Massachusetts are a good guide for which cable to other states under the ACA, expected to bring many more previously strategies show promise and which are several factors might improve or hamper uninsured people to the exchanges, likely likely to fail or flounder. the particular performance of small-group giving the exchanges more leverage, if they exchange structures in other states, com- wish to use it, to insist on participation For more information about the study, pared to the Massachusetts experience. First, in the employer component in order to contact Mark Hall at mhall@wakehealth.edu other states may have a greater need for an qualify for participation in the subsidized or 336-716-9807. employer-based exchange structure than did Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 16 References Ierna, C. Contributory plan update. https://www.mahealthconnector.org/ Bradley, E. H., Curry, L. A., & Devers, Massachusetts Health Connector, 2009. portal/binary/com.epicentric.contentman- K. J. Qualitative data analysis for health https://www.mahealthconnector.org/ agement.servlet.ContentDeliveryServlet/ services research: developing taxonomy, portal/binary/com.epicentric.contentman- Health%2520Care%2520Reform/ themes, and theory. Health Serv Res 2007. agement.servlet.ContentDeliveryServlet/ How%2520Insurance%2520Works/ 42, 1758-1772. About%2520Us/Publications%25 Connector%2520Annual%2520Repo 20and%2520Reports/2009/2009-1 rt%25202010.pdf. Curtis, R. & Neuschler, E. “Small- 1-12/PPT%2520-%2520CI%2520- employer (“SHOP”) exchange issues.” %2520Small%2520Group%2520Upda NFIB Research Foundation. Small busi- Institute for Health Policy Solutions, te%2520-%252011%252012%252009.ppt. ness and health insurance: one year after 2011. http://www.healthexchange.ca.gov/ enactment of PPACA, 2011. http://www. Documents/Small%20Employer%20 Institute for Health Policy Solutions. nfib.com/research-foundation/surveys/ (SHOP)%20Exchange%20Issues.pdf. Study of SHOP exchange: analy- healthcare-year1. sis of key Maryland SHOP-related Day, R. & Nadash, P. New state insur- policy options, 2011. http://dhmh. Quantria Strategies. Health insurance in ance exchanges should follow the example maryland.gov/exchange/pdf/ the small business market: availability, of massachusetts by simplifying choices FinalSHOPExchangeIHPS_1.pdf. coverage, and the effect of tax incentives, among health plans. Health Aff, 2012. 31, 2011. http://www.sba.gov/sites/default/ 982-98. Jost, T. S. Health insurance exchanges and files/386tot.pdf. the Affordable Care Act: eight difficult Doonan, M. T. & Tull, K. R. Health care issues. The Commonwealth Fund, 2010. Urff, J. E.. Health reform toolkit series: reform in Massachusetts: implementation http://www.commonwealthfund.org/ resources from the Massachusetts experience: of coverage expansions and a health insur- Content/Publications/Fund-Reports/2010/ determining health benefit designs to be offered on ance mandate. Milbank Q, 2010. 88, 54-80. Sep/Health-Insurance-Exchanges-and-the- a state health insurance exchange. Blue Cross Affordable-Care-Act.aspx. Blue Shield of Massachusetts Foundation, Fronstin P. Private health insurance 2011a. http://www.rwjf.org/files/ exchanges and defined contribution Kingsdale, J. How small business health research/73722.bcbsmass.toolkit3.pdf. health plans: is it déjà vu all over again? exchanges can offer value to their future Employee Benefit Research Institute, customers--and why they must. Health Aff, Urff, J. E. Health reform toolkit series: resources 2010. http://www.ebri.org/pdf/briefspdf/ 2012. 31, 275-283. from the Massachusetts experience: Implementing EBRI_IB_07-2012_No373_Exchgs2.pdf. a successful public education and marketing cam- Lischko, A. Fixing the Massachusetts paign to promote state health insurance exchanges. Gabel, J. R., Whitmore, H., & Pickreign, health exchange. Rep. No. 71). Pioneer Blue Cross Blue Shield of Massachusetts J. Report from Massachusetts: employers Institute, 2011. http://www.pioneerinsti- Foundation, 2011b. http://www.rwjf.org/ largely support health care reform, and tute.org/pdf/110309_Fixing_Connector. files/research/covmarketingtoolkit2.pdf. few signs of crowd-out appear. Health Aff, 2008. 27, w13-w23. Long, S. K., Stockley, K., & Dahlen, H. Weiner, B. J., Amick, H. R., Lund, J. L., National reform: what can we learn from Lee, S. Y., & Hoff, T. J. Use of qualitative Gardiner, T. Health insurance exchanges evaluations of Massachusetts? State Health methods in published health services and of past and present offer examples of Access Reform Evaluation,2011. http:// management research: a 10-year review. features that could attract small-business www.shadac.org/files/shadac/publications/ Med Care Res Rev, 2011. 68, 3-33. customers. Health Aff, 2012. 31, 284-289. MassachusettsNationalLessonsBrief.pdf. Hall, M. A.. The role of independent agents Massachusetts Health Connector. Report in the success of health insurance market to the Massachusetts legislature: imple- reforms. Milbank Q, 2000. 78, 23-45. mentation of health care reform, 2010. Employers’ Use of Health Insurance Exchanges: Lessons from Massachusetts page 17 Endnotes to implement in an individual choice model Cross was concerned that brokers would learn 1 Initially, SBSB and the Connector had agreed because insurers do not know how many work- to “fool the system” by comparing Blue Cross to transfer 17,000 subscribers in two stages, ers will sign up at the point that insurers must quotes obtained from different sources. starting with the 1,200 to 1,600 (exact numbers quote the rates to be used by employees in 15 In one recent national survey, 79 percent of vary) whose policies already matched what the selecting a plan (see Institute for Health Policy small employers use a broker to purchase their Connector offered and then moving the remain- Solutions, 2011, for more discussion). Other dif- health insurance (NFIB Research Foundation, ing 15,000 or so for whom either new coverage ficulties and frustrations noted by brokers related 2011). packages would need to be developed or who to the fact that, for various technical reasons, the 16 Some brokers insisted this is not the case, but would need to select different coverage. This web interface showed the employer only how most were brokers who have not placed business second, much larger transfer never occurred, much it was contributing, and not the amount of with the Connector. A few others noted that however. The exact reasons remain murky. By the total premium. According to one broker, “It the nominal commission is similar in and out the time the second transfer was scheduled to was just weird—a whole different way of” com- of the Connector, but the Connector does not begin, the leading insurers had withdrawn from paring plans and prices. pay the bonuses that insurers award outside the the Connector’s employer program. Some inter- 8 Moreover, this approach creates a third potential Connector for a greater volume of business. viewees also thought that insurers objected to the problem. Composite rating for one product but Finally, one broker noted that the Connector transfer, and others thought that SBSB changed list-billed age rating for other products creates fails to pay any “override” commission to its mind on how advantageous the transfer would an inherent bias toward older workers choosing “general agents,” who function as intermediaries be for either it or for its customers. the reference plan and younger workers opt- or conduits between insurers and rank-and-file 2 The private intermediaries do still charge an ing for alternative coverage. Such age sorting brokers. association membership fee of roughly $125 per did not materialize in the Connector’s limited 17 For instance, one small-group broker, who company, which the Connector does not charge. pilot. However, a couple of observers noted that seemed to like what the Connector stood for The fee also provides access to other association adverse selection might have occurred if this rat- but had previously concluded that it did not benefits and products. ing structure had remained in place longer such offer better value, wrote the following after the 3 This is confirmed by an independent analysis that brokers became more aware of the discrep- interview: “After our meeting we decided to take estimating that Massachusetts has the lowest per- ancy and began to advise workers about how to a hard look at establishing a stronger relationship centage of small firms in the country (other than take advantage of it. (For thoughtful analyses of with the Connector to see if it brought any Washington, D.C.) whose wages would qualify other, more complex ways to deal with these dif- value to the small-group market and our clients. for the federal tax credit (Quantria Strategies, ficulties, see Curtis and Neuschler, 2011; Institute Unfortunately it does not. Rates are generally 2011, p.60). for Health Policy Solutions, 2011.) higher or the same and plan designs are more 4 Tiered networks are those that include a broad 9 The smaller the group, the more likely it is that limited than what employers can get through the array of providers but place them in different insurance purchasing decisions will reflect the existing small-group marketplace. While they will tiers, with varying cost-sharing for patients, to health conditions of particular employees, includ- pay more commission to brokers, we believe it encourage use of lower-cost providers. ing those of the business owner. would be a disservice to put clients there due to 5 Note that standardization of benefits entails 10 Abby Goodnough, “Navigating the Health Care the limitations and some potential service issues.” more than offering benefits in tiers identified by Maze,” New York Times, June 12, 2012. 18 The reform law requires employers to provide precious metals (Gold, Silver, Bronze, and so 11 According to two sources, renewals are more workers with a tax-sheltered means to make forth). The metal tiers are based on a plan’s actu- troublesome for some insurers than others their premium contributions or individual arial value determined largely by copayments and because some insurers guarantee a compos- insurance purchases (known as section 125 deductibles, that is, what percentage of covered ite rate for a year, thus assuming the risk of plans), and employers must file an annual report benefits are paid by the insurer rather than by the changes in a group’s demographics, and so they about meeting their employer responsibility patient. A given actuarial value may be achieved need more detailed demographic information requirements under the law. Small employers through a wide variety of benefit structures. at renewal in order to “true up” the group’s often turn to their insurance brokers to help Therefore, the Connector concluded based on composite rate, whereas other insurers require with these Connector-enforced requirements market research that additional standardization of the composite rate to be periodically updated so that brokers “felt like [they were] giving copayments and deductibles is needed to simplify throughout the year. Another broker complained the Connector a lot of free service” to help choices beyond merely arraying them in actuarial that minor discrepancies in the renewal process implement the law. tiers. Urff, 2011a; Day and Nadash, 2012. can result in employers being automatically 19 Because of community rating and guaranteed 6 Moreover, many employers either do not pur- dropped, leaving them uninsured for a time. issue laws, Massachusetts insurers have not paid chase any ancillary services and products or pur- 12 This response was given by a quarter of small any commissions for individual (nongroup) chase them elsewhere. In a recent national sur- employers that offered coverage and half of coverage, thus making it more difficult for vey, only a third of small employers who used a those that did not. The overall sample size was individuals to find insurance. Now, half of this broker to purchase health insurance also used the 629 small employers. market segment purchases its coverage through broker to purchase some other type of business 13 For more detail, see Urff, 2011b. the Connector. insurance (NFIB Research Foundation, 2011). 14 Blue Cross objected that, if rating decisions 20 The Connector’s subsidized coverage is provided 7 Until 2014, insurers also are allowed to vary could be made independently by the Connector, by a different set of Medicaid-based health plans rates according to group size in order to reflect then minor differences in how the calculations that do no include the market’s leading private the greater adverse selection that occurs among are made or what information is gathered might insurers. smaller groups. But group size rating is difficult result in discrepant quotes to the same group for the same coverage, from two sources. If so, Blue