August 6, 2024 • 22 mins
Why are small businesses in Maine facing skyrocketing health insurance premiums, and what can they do about it? Join us as we dive into this urgent issue with Connor Kennedy from Acadia Benefits. We'll unpack the complexities of the community-rated small group market, discussing how Maine's aging population and high healthcare costs are pushing premiums higher and higher. You'll gain insights into the implications of merging the individual and small group markets, the standardization of plans and rates, and the effects of the individual mandate's repeal on the insurance pool. This episode promises to equip you with the understanding needed to navigate these turbulent waters.
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Episode Transcript
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Speaker 1 (00:00):
This is Small Business Big World, our weekly
podcast prepared by the team atPaper Trails.
Owning and running a smallbusiness is hard.
Each week, we'll dive into thechallenges, headaches, trends,
fun and excitement of running asmall business.
After all, small businesses arethe heartbeat of America and
our team is here to keep thembeating.
Welcome to Small Business BigWorld, our weekly podcast, where
(00:22):
we talk about all the fun andexciting things about being a
small business owner.
A little housekeeping before weget going.
Don't forget to like, follow,share, subscribe, rate, review.
We are everywhere ApplePodcasts, Spotify, YouTube,
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If you are out there, we areout there and you can find us
out there too.
So today, my guest is ConnorKennedy of Kennedy Benefits.
Welcome back, Connor.
(00:42):
Thank you for joining us.
Speaker 2 (00:43):
Thank you for having me, Chris.
Speaker 1 (00:44):
So today we're going to talk about why is my health
insurance so goddamn expensive,right?
I certainly know in healthinsurance premiums I write
Anthem hundreds of thousands ofdollars a year worth of checks
in my business, and certainly Ithink that's very common among
other businesses.
So there's been a lot ofchanges in the last few years.
I feel like every year ourpremiums go up 10 or 15 percent
(01:07):
or more sometimes, and it's beenalways the game to try to
figure out.
I think we all as businessowners feel like you know, my
only choice is to do cheaper.
You know, offer less good plans, worse plans, I guess, right?
You know higher deductibles andall that kind of stuff.
We all hear those things.
So, you know, I figured it'd begood for us to chat and see why
(01:28):
these things are so expensive.
Speaker 2 (01:30):
Yeah, and I think today what we really want to
focus on is the increases we'reseeing specifically in Maine and
in the small group market.
We'll spend too much time if wetalk about what our customers
say, but I think we'll talkabout the community-rated small
group market where a lot ofMaine's built on small
(01:50):
businesses.
So I think this will be goodfor a lot, so let's start right
there.
Speaker 1 (01:54):
So what does that mean?
I'm community-rated.
I'm a small business.
What does that?
Speaker 2 (01:58):
mean.
So in Maine, if you have under50 benefit-eligible employees in
the preceding calendar year,you were considered a small
employer and you are in thecommunity market, so you're not
rated based on your experience.
Right, how you're how manyclaims.
There are the health of yourpopulation.
You're rated based on the ageof your population, the location
(02:20):
of your population um, in ma,as we were talking about before
this right, we are one of theoldest, if not the oldest, state
in the US, so, and we live inthe Northeast, which is known
for being the most expensiveplace to receive healthcare.
So, with just those two factorsright there, you know that we
are going to be in a bubble of,you know, high rates.
Speaker 1 (02:42):
So many of these things we're gonna talk about
today, or most of these things,are very Maine specific, but
certainly many of them may applyin other states.
Every state has differentinsurance laws, different
insurance policies.
I was saying before, healthinsurance is just about as
exciting as payroll.
It's.
You know about watching paintdry, right, there's lots of
details, lots of minutiae.
We're going to try to keep ithigh level to make sure that
(03:02):
everyone understands that.
But there's been a lot ofchanges in Maine the last few
years, right, the first one wewere talking about earlier is
kind of that merging of themarkets right.
Explain to me what happened withthat and why that has made an
impact.
Speaker 2 (03:16):
Yeah, so back in 23, a lot of you who are listening
may recall, maine decided tomerge the individual market with
the small group market to makeit Individual markets.
Speaker 1 (03:28):
You're out on healthcaregov Exactly.
Speaker 2 (03:30):
You have your own individual plan as opposed to
having a group insurancecoverage through your employer.
And one of the main reasons todo this was to standardize plans
so you can get the same planthrough your employers you could
in the individual market.
So standardizing the and alsostandardizing the rates.
So, for example, my age, if youhad an age-banded policy, the
(03:55):
same rate I could get through asmall employer would essentially
be the same rate you could geton the individual marketplace.
What we know is that individualplans historically, before this
, were more expensive thanhaving a group policy.
That's really not the casetoday with the merged market.
Speaker 1 (04:12):
Okay.
So when we talk about that, Imean that also applies now,
because the individual mandatefrom ACA has been wiped away,
right?
Right?
So we've merged those markets,which means we have two
different populations, and nowone of those populations doesn't
have to get insurance anymore,right?
So we've merged those markets,which means we have two
different populations and nowone of those populations doesn't
have to get insurance anymore,right?
Speaker 2 (04:32):
So that's kind of made a difference too, right?
Yeah, exactly.
And these two items are notdirectly I guess directly
impacting 2024 rates, which I'lltalk about in a little bit.
But everything compounds on topof each other.
So, like you just said, whenthe individual mandate went away
, or I guess, you know, tookeffect in 2019, when people
weren't penalized for not havinghealth care anymore.
You can look at that in a coupleways, but, you know, one of the
(04:54):
things that we've seen orstarting to see now is, you know
there could be youngerindividuals that aren't going to
be penalized anymore for nothaving health care right, and as
you take people out of the pooland only people who need the
policy are paying into thepolicy right, incurring claims,
you can start to see costs go up.
So that's kind of a trend we'veseen, you know, over the past
(05:16):
three years, slowly impactingthings.
Right, it's a compoundingfactor.
Speaker 1 (05:18):
Right, there's lots of things we're going to talk
about today and all of them addup to say, gosh, it's really
expensive to get healthinsurance.
So we were talking explain tome about you know.
You're talking about levelfunding plans and how that works
, and that's another one ofthese incremental changes that
have been made right.
Speaker 2 (05:35):
Yeah, absolutely so.
Level funding's a greatsolution for many employers.
Now, if you're over 11employees in the state of Maine,
you can get a level fundedquote from your broker Now they
don't work great for everyone.
Carriers tend to identify whichgroup A level funded policy will
(05:57):
work for and just to back up alittle bit, a level funded
policy takes you out of thesmall group community rated
system.
It's you're underratedspecifically on your population.
So if you have a young, healthypopulation that's not incurring
a lot of claims, that doesn'thave ongoing high-cost claim or
(06:19):
risk or taking very expensivedrugs, a level-funded policy
could be great for your companyand there's a lot of positives
with it.
You can even get some dollarsback at the end of the year if
you run better than expected.
I'm not going to go into detailabout all that, but some will
say, like we were talking aboutwith the individual mandate, as
(06:40):
you start to pull healthy riskout of a big pool of population,
that can start to affectindividual and small group rates
over time.
Speaker 1 (06:52):
So more costs just a little bit more every time right
, another chip in the armor.
So what about?
You had mentioned somethingabout the ICRAs, the HRAs.
What is going on with those two?
Speaker 2 (07:02):
Yeah.
So how I want to talk aboutICHRAs today is specifically not
for small employers ICHRAs.
But we've seen some largeemployers that have lots of
high-cost claims on their books,right, every single year
they're getting 30% increasesplus.
And you know, this is thattough, that tough employee range
(07:25):
where, say, 51 to 100, right,you're not big enough to really
be able to handle some of thosehigh cost claims and then you're
not small enough to be in thecommunity market.
So what an ICHRA allowsemployers to do is to
essentially term their groupcoverage, give individuals a
reimbursement to buy a policythrough the individual
(07:46):
marketplace.
So what we've seen is some ofthese, some employers, right,
who can't which rightfully so,can't handle these 30% increases
year after year after year, areable to kind of put that claim
risk back into the individualmarketplace and continue to pay
their reimbursement every year.
So it's, it is a cost saver forsome large employers.
(08:08):
But again, we're talking aboutcompounding things that are
happening here as we're putting.
Speaker 1 (08:15):
Well, you're taking more people out of the pool,
right, right, right.
You keep going back to that.
Speaker 2 (08:18):
And you're putting bad risk into the pool, right?
So we're seeing I don't thinkwe're seeing the effects of that
yet I think that is possibly tocome Right.
Speaker 1 (08:28):
Right, because this is a one big actuarial formula.
Somewhere there's a bunch ofgeeks in a room, somewhere that
know way more about this than wedo, I'm sure, but that are
really crunching the numbers andsaying, okay, we need this many
healthy people to pay for thismany sick people to you know to
get to the end of the day.
(08:52):
What's this many sick people toget to the end of the day?
What's it cost you every month?
And certainly that's a verycomplicated formula that I will
probably never understand.
I mean, I get the gist of it.
But so in Maine we've had somelegislative adjustments that
have really started to drive thechange in rates right, and
those are.
A lot of them are great.
A lot of them are improvements.
They are requiring the.
A lot of them are improvements,they know, requiring the
carriers to be offering certainthings, which is wonderful
benefit, but obviously thosecome at a cost right, so, yeah,
(09:15):
so what's been going on in thelegislature that's causing some
of those things?
Speaker 2 (09:18):
Just, you know, carriers are companies just like
everyone else, where you knowif they are being required to
take on an added risk, they'regoing to increase their cost,
and so who has to pay for that?
It's the members, right, yourpremium is going to go up.
So in 24, there were a lot ofsignificant state mandates that
went into place that carrierswere required to cover certain
(09:42):
services, and the one thatreally drove a lot of claim
costs was access to fertilitycare.
We've heard from differentcarriers that that added
anywhere from two and a half tothree percent on rates.
So say, we're talking about aan eight to ten percent average
(10:02):
trend increase every single yearfor pharmacy and medical, not
talking about everything thatwe've talked about already.
That's just talking aboutmedical and pharmacy.
When we start to add in thesestate mandates, we're talking
about another two and a half tothree percent that's added in.
And, like you said perfectlybefore, is these benefits are
(10:23):
great for people, right?
This is, this is a positive forpeople, but someone has to pay
for it, right?
So it's going to come back downto the members that are
enrolling in the policies topick up that cost Right.
Speaker 1 (10:33):
What other types of I mean?
Certainly fertility is the bigone.
We certainly know fertilitytreatment is not cheap, right,
and that's coming in there.
What are some of the other onesthat have been out there that
really have made the changes?
Speaker 2 (10:44):
Sure, I mean, there's a list of about five of them
here, you know.
Remove barriers to abortioncoverage.
Promote better dental care forcancer survivors.
Improve outcomes for personswith limb loss.
You know the main driver,though, that we've heard from
(11:06):
the carriers that were going toput the most risk on them to
increase their rates.
Speaker 1 (11:08):
Was the fertility?
Yes, absolutely interesting.
Yeah, yeah, I think, certainlyagain, as you get, the more you
have to cover, the more it'sgoing to cost to do absolutely
and it's a great benefit for thepeople that need it right now
that they had.
Speaker 2 (11:18):
Now they have a and obviously the carrier is going
to have prior authorizationrequirements and they're going
to put areas in place to makesure it's appropriate for that
employee or member, but with itbeing required to be covered.
Yeah, the rates are going toincrease.
Speaker 1 (11:35):
That's good Interesting, so talk to me.
The other thing we talked aboutwas this guaranteed reinsurance
program, which kind of when wetalked about this.
I'm like I didn't even knowthis existed, and I'm sure most
people do.
Can you explain what that, whatit is and what changed its?
Speaker 2 (11:50):
cause of issues you may not know, but today you're
paying about $4.
I think it's $4 per employeeenrolled that the carrier is
paying to Megara, which is themain guarantee access
reinsurance association.
So that's probably somewhat newto people.
They probably haven't heard ofMegara before.
But Megara, basically what itis is that all the carriers pay
(12:13):
into this reinsurance TPA, thisreinsurance program, and if they
, they are reimbursed forcertain high cost claims that
members incur.
So for 23, for example,carriers were reimbursed 100%
for all claims between 90K and275, right?
(12:33):
So if I had a cancer claim thatwas in that 90K to 275, the
carriers will be reimbursed bythe Megera for that claim right.
Speaker 1 (12:43):
So it's insurance for the insurance company, it's
insurance for insurance exactlyNow the parameters of Megara is
changing for 24.
Speaker 2 (12:51):
And this is a big cost driver, you know.
I think on average our smallgroup block got hit with about a
15% increase this year for 2024.
Speaker 1 (13:01):
Don't tell me that.
Speaker 2 (13:02):
You're coming to me in a couple months with changes.
Don't tell me that.
So one of the big changes thathappened with Megara is that
carriers will now be reimbursed75%, so not 100% anymore.
They're being reimbursed 75%for high-cost claims between
$135 and $275.
So we've lessened thecoinsurance that carriers are
(13:25):
getting that now it's $75, andwe've shortened up the window.
So carriers look at that andsay oh no, but again, like we
talked about, they're not goingto take on this added risk,
right?
This risk is going to be pushedback down to the payers who are
paying the premium.
So that's one of the reasonswhy we will see.
(13:48):
You know, I think an abnormalincrease in 24 is.
I think you know my note hereis, or is about one third of the
increase rates for 2024 hasspecifically come from Megara.
Wow, there we go.
Speaker 1 (14:05):
Can't wait to see our renewal.
Yep Can't wait to see ourrenewal.
So you know, aside from all ofthese legislative changes and
the mechanics of the changingmarketplace, we've been feeling
the increased cost of lifeeverywhere, and that doesn't
stop at the drugstore or at thehospital, right, All those are
going up as well, and that'sdriving added costs to the
insurance companies whichthey're passing on right.
Speaker 2 (14:26):
Exactly Everything's going up, right, and we had
talked about earlier normalwhether it's new technology, new
drugs, normal inflation I meanmedical and pharmacies anywhere
between eight to 10% any year,like that's what you should be
budgeting for.
Now there's it's different withall small groups, right?
Whether you bring on a fewyounger individuals at renewal,
(14:50):
maybe a couple older individualsdrop off, vice versa, right,
this can go both ways with lotsof different companies, but on
average, that's what it will be.
Now, when we start to talkabout everything we talked about
today merged market levelfunding, ichras, maine's one of
the oldest populations in thecountry, the Megara right you
(15:11):
start to tack on everything, youcan see how this average
increase of 15% to 18% is whatwe are seeing in the small group
market.
Speaker 1 (15:22):
Which is scary for all these small business owners
out there.
Certainly, I think we all feelthe need to be, or that we
should be, providing for ouremployees and making sure that
is.
What are you seeing?
What levers and switches areyou seeing people your clients
use to manage these costs?
Speaker 2 (15:38):
and these increases, yeah, so in the small group
market it's very rigid, so it'sall about shifting cost.
So I guess we can talk aboutshifting cost in two ways.
You can shift costs throughplan design, right, so you're
shifting cost to people that usethe plan, so not everyone hits
(16:01):
their deductible out-of-pocketevery year right.
It's a very few, so that'sprobably the most common thing
that we'll see.
Right, most brokers will showyou a bunch of alternates at
every single renewal.
You know, say, you got a $1,500deductible plan with a $5,000
out-of-pocket max, somethinglike that.
To take down some of that 15,you may be looking at a $3,000
(16:22):
deductible with, you know, a$9,000 out-of-pocket max.
Right, it's just shifting costsin that way.
Maybe you want to put a dualoption in, right, and you as the
employer can say, hey, I'mgoing to pay all my, I'm going
to pay 80% of the low costoption.
If you want to buy the higheroption, you know you pay the
difference, right?
(16:42):
So there's cost modelingchanges that you can do as well,
and that'd be the secondportion of shifting cost what
you as the employer are going todo with your contribution
strategy.
Speaker 1 (16:53):
And we see a lot of clients that are using HSAs and
things like that.
The employer is putting into anHSA to help you cover a higher
deductible or something likethat too.
Right, absolutely, because thatmay make a difference.
Speaker 2 (17:06):
High deductible health plans are very common in
the Northeast and we had talkedabout a lot of this last time
too, when we spoke.
But HSAs are.
I think that they're great.
They require more employeeeducation, but when you put them
in and employers are used tothem, I think they value them.
And the key piece about aqualified high deductible health
plan is pairing that with thehealth savings account.
(17:27):
Paying a lower premium and thenhaving an employer or yourself
fund an HSA that rolls overevery year is a great way to
build.
We call it the healthcare 401k.
Speaker 1 (17:37):
Sure, which that's a whole different conversation,
probably.
But what are you doing withthat education?
Because I know my employees inparticular.
They're great, but foreverright.
Everyone's used to just goingto the doctor and paying my $25
and walking out.
And how are you changing thatmindset of no guess what?
(17:58):
That doctor's appointment isnow $180 and you have to pay
that out of your HSA or out ofyour pocket until you get to
whatever point, right?
Speaker 2 (18:02):
Yeah, we think most of the time employees will just
see an open enrollmentpresentation, maybe once a year,
right?
Something that we do do atAcadia Benefits is that we can
provide recordings.
We call them, you know, benefiteducation recordings so we
could look at the benefit plansthat you have today.
We'll do a recording on what'scovered.
(18:23):
You know, anything that's newfor 24, anything to keep an eye
out for, right?
Hey, this copay went up herelike you're talking about, or?
Or, hey, you know it'sdeductible co-insurance now on
that tier four drug.
You know, keep an eye out forthat, things like that, right?
So then you can have thatrecording available for
employees to watch wheneverthey'd like.
Speaker 1 (18:41):
It's interesting, I know.
I think it's just reallychanging the mindset and
certainly I think healthcare istrying, the whole market is
trying to change people to beingmuch more consumer driven and
oriented and and saying, hey,maybe you can get your MRI.
You know, at the trailer downthe street, you don't have to go
to the big shiny hospital.
You know, an MRI is an MRIright.
You know, certainly I think wemany people might, for itself,
(19:04):
probably include is I need totake care of myself, I need to
have the best care, whatever,and that might mean going to the
Taj Mahal.
Speaker 2 (19:09):
It might not right, yeah, People, you know they
design the plan so people canmake their decisions.
Right, the message we alwayspush if it's not an emergency,
stay out of the emergency room.
Right, You're going to get todeductible co-insurance there.
Go to the urgent care.
Speaker 1 (19:35):
It's more often to co-pay, unless you're on a high
deductible health plan.
But it's going to be a muchlower out-of-pocket cost to you
if you hit that urgent care.
But of course, if it's anemergency, don't go to the
emergency.
Sure, sure, sure.
You know this is my brainspinning and all the things and
reasons that this is.
You know, things are soexpensive and certainly I think
we'll continue to see thingsevolve as the legislature acts,
as costs continue to rise, and Idon't think this is anything
that's going to go away anytimesoon, unfortunately.
But I think it's been reallyhelpful to me as a small
business owner to understand allof these things that are going
(19:55):
into it.
So thank you very much.
Speaker 2 (19:57):
Absolutely, and we were talking just, you know, as
your renewal coming out, or asyou know all you know employers
or renewals are coming up.
You know, make sure, whenyou're getting your quote right,
that you're able to seealternates from alternate
carriers, right?
I think, especially in thesmall group marketplace, you
really want to look at what'savailable to you, because you
(20:18):
never know where when a carrieris going to be competitive or
not, right?
We've seen some carriers bevery competitive in Q1 and Q2.
They've raised their rates aton for Q3, q4, right.
And now other carriers are morecompetitive.
So it's looking across theboard, looking at the plan
options and the carriersavailable.
Speaker 1 (20:35):
One of the things you've been great about is
giving us that spreadsheet with.
Speaker 2 (20:38):
I feel like 150 options.
All right, then we get on thecall and narrow it down Right,
which?
Speaker 1 (20:42):
usually I look at about four columns, right, I
really don't care about all this, but it's really helpful to see
that and see what's out thereand so that you know, and
certainly we've talked withmutual clients and said you're
going to get that, You're goingto have the 150 options to
choose from, which is reallyhelpful when trying to make
decisions, and that's when thatplan, design and things like
that kind of come into place.
So good.
(21:03):
Well, thank you so much, Connor.
It's great to have you back andchat about this brain numbing
topic, for sure.
Speaker 2 (21:09):
We can do it again, so thanks for having me.
Speaker 1 (21:10):
Well, we'll do it again.
For sure, there's plenty more.
Maybe that you know thehealthcare 401k.
Speaker 2 (21:15):
Yes absolutely.
Speaker 1 (21:16):
That's one to have too, for sure, so awesome.
Well, thank you very much forjoining us.
Be sure to like, follow, share,subscribe, rate, review
everywhere you are.
If you have any questions forus, you trailscom, we're happy
to get you in touch.
How do people get in touch withyou, connor?
What's the best way?
Instagram?
Speaker 2 (21:31):
email LinkedIn.
Speaker 1 (21:33):
LinkedIn.
Speaker 2 (21:33):
Connor Kennedy, katie benefits.
You can always reach out,contact us through our website
as well, and then someone fromKatie benefits will get in touch
with you, mostly same day.
Speaker 1 (21:41):
Awesome.
Well, thanks everyone forlistening and we'll see you next
week.
Thanks for listening to thisweek's episode of a small
business, big world.
This podcast is a production ofPaper Trails.
We are a payroll and HR companybased in Kennebunk, maine, and
we serve small and mid-sizedbusinesses across New England
and the country.
If you found this podcasthelpful, don't forget to follow
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(22:02):
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The material presented in thispodcast is for general
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By inviting this guest to ourpodcast, paper Girls does not
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This is Small Business Big World, our weekly
podcast prepared by the team atPaper Trails.
Owning and running a smallbusiness is hard.
Each week, we'll dive into thechallenges, headaches, trends,
fun and excitement of running asmall business.
After all, small businesses arethe heartbeat of America and
our team is here to keep thembeating.
Welcome to Small Business BigWorld, our weekly podcast, where
(00:22):
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So today, my guest is ConnorKennedy of Kennedy Benefits.
Welcome back, Connor.
(00:42):
Thank you for joining us.
Speaker 2 (00:43):
Thank you for having me, Chris.
Speaker 1 (00:44):
So today we're going to talk about why is my health
insurance so goddamn expensive,right?
I certainly know in healthinsurance premiums I write
Anthem hundreds of thousands ofdollars a year worth of checks
in my business, and certainly Ithink that's very common among
other businesses.
So there's been a lot ofchanges in the last few years.
I feel like every year ourpremiums go up 10 or 15 percent
(01:07):
or more sometimes, and it's beenalways the game to try to
figure out.
I think we all as businessowners feel like you know, my
only choice is to do cheaper.
You know, offer less good plans, worse plans, I guess, right?
You know higher deductibles andall that kind of stuff.
We all hear those things.
So, you know, I figured it'd begood for us to chat and see why
(01:28):
these things are so expensive.
Speaker 2 (01:30):
Yeah, and I think today what we really want to
focus on is the increases we'reseeing specifically in Maine and
in the small group market.
We'll spend too much time if wetalk about what our customers
say, but I think we'll talkabout the community-rated small
group market where a lot ofMaine's built on small
(01:50):
businesses.
So I think this will be goodfor a lot, so let's start right
there.
Speaker 1 (01:54):
So what does that mean?
I'm community-rated.
I'm a small business.
What does that?
Speaker 2 (01:58):
mean.
So in Maine, if you have under50 benefit-eligible employees in
the preceding calendar year,you were considered a small
employer and you are in thecommunity market, so you're not
rated based on your experience.
Right, how you're how manyclaims.
There are the health of yourpopulation.
You're rated based on the ageof your population, the location
(02:20):
of your population um, in ma,as we were talking about before
this right, we are one of theoldest, if not the oldest, state
in the US, so, and we live inthe Northeast, which is known
for being the most expensiveplace to receive healthcare.
So, with just those two factorsright there, you know that we
are going to be in a bubble of,you know, high rates.
Speaker 1 (02:42):
So many of these things we're gonna talk about
today, or most of these things,are very Maine specific, but
certainly many of them may applyin other states.
Every state has differentinsurance laws, different
insurance policies.
I was saying before, healthinsurance is just about as
exciting as payroll.
It's.
You know about watching paintdry, right, there's lots of
details, lots of minutiae.
We're going to try to keep ithigh level to make sure that
(03:02):
everyone understands that.
But there's been a lot ofchanges in Maine the last few
years, right, the first one wewere talking about earlier is
kind of that merging of themarkets right.
Explain to me what happened withthat and why that has made an
impact.
Speaker 2 (03:16):
Yeah, so back in 23, a lot of you who are listening
may recall, maine decided tomerge the individual market with
the small group market to makeit Individual markets.
Speaker 1 (03:28):
You're out on healthcaregov Exactly.
Speaker 2 (03:30):
You have your own individual plan as opposed to
having a group insurancecoverage through your employer.
And one of the main reasons todo this was to standardize plans
so you can get the same planthrough your employers you could
in the individual market.
So standardizing the and alsostandardizing the rates.
So, for example, my age, if youhad an age-banded policy, the
(03:55):
same rate I could get through asmall employer would essentially
be the same rate you could geton the individual marketplace.
What we know is that individualplans historically, before this
, were more expensive thanhaving a group policy.
That's really not the casetoday with the merged market.
Speaker 1 (04:12):
Okay.
So when we talk about that, Imean that also applies now,
because the individual mandatefrom ACA has been wiped away,
right?
Right?
So we've merged those markets,which means we have two
different populations, and nowone of those populations doesn't
have to get insurance anymore,right?
So we've merged those markets,which means we have two
different populations and nowone of those populations doesn't
have to get insurance anymore,right?
Speaker 2 (04:32):
So that's kind of made a difference too, right?
Yeah, exactly.
And these two items are notdirectly I guess directly
impacting 2024 rates, which I'lltalk about in a little bit.
But everything compounds on topof each other.
So, like you just said, whenthe individual mandate went away
, or I guess, you know, tookeffect in 2019, when people
weren't penalized for not havinghealth care anymore.
You can look at that in a coupleways, but, you know, one of the
(04:54):
things that we've seen orstarting to see now is, you know
there could be youngerindividuals that aren't going to
be penalized anymore for nothaving health care right, and as
you take people out of the pooland only people who need the
policy are paying into thepolicy right, incurring claims,
you can start to see costs go up.
So that's kind of a trend we'veseen, you know, over the past
(05:16):
three years, slowly impactingthings.
Right, it's a compoundingfactor.
Speaker 1 (05:18):
Right, there's lots of things we're going to talk
about today and all of them addup to say, gosh, it's really
expensive to get healthinsurance.
So we were talking explain tome about you know.
You're talking about levelfunding plans and how that works
, and that's another one ofthese incremental changes that
have been made right.
Speaker 2 (05:35):
Yeah, absolutely so.
Level funding's a greatsolution for many employers.
Now, if you're over 11employees in the state of Maine,
you can get a level fundedquote from your broker Now they
don't work great for everyone.
Carriers tend to identify whichgroup A level funded policy will
(05:57):
work for and just to back up alittle bit, a level funded
policy takes you out of thesmall group community rated
system.
It's you're underratedspecifically on your population.
So if you have a young, healthypopulation that's not incurring
a lot of claims, that doesn'thave ongoing high-cost claim or
(06:19):
risk or taking very expensivedrugs, a level-funded policy
could be great for your companyand there's a lot of positives
with it.
You can even get some dollarsback at the end of the year if
you run better than expected.
I'm not going to go into detailabout all that, but some will
say, like we were talking aboutwith the individual mandate, as
(06:40):
you start to pull healthy riskout of a big pool of population,
that can start to affectindividual and small group rates
over time.
Speaker 1 (06:52):
So more costs just a little bit more every time right
, another chip in the armor.
So what about?
You had mentioned somethingabout the ICRAs, the HRAs.
What is going on with those two?
Speaker 2 (07:02):
Yeah.
So how I want to talk aboutICHRAs today is specifically not
for small employers ICHRAs.
But we've seen some largeemployers that have lots of
high-cost claims on their books,right, every single year
they're getting 30% increasesplus.
And you know, this is thattough, that tough employee range
(07:25):
where, say, 51 to 100, right,you're not big enough to really
be able to handle some of thosehigh cost claims and then you're
not small enough to be in thecommunity market.
So what an ICHRA allowsemployers to do is to
essentially term their groupcoverage, give individuals a
reimbursement to buy a policythrough the individual
(07:46):
marketplace.
So what we've seen is some ofthese, some employers, right,
who can't which rightfully so,can't handle these 30% increases
year after year after year, areable to kind of put that claim
risk back into the individualmarketplace and continue to pay
their reimbursement every year.
So it's, it is a cost saver forsome large employers.
(08:08):
But again, we're talking aboutcompounding things that are
happening here as we're putting.
Speaker 1 (08:15):
Well, you're taking more people out of the pool,
right, right, right.
You keep going back to that.
Speaker 2 (08:18):
And you're putting bad risk into the pool, right?
So we're seeing I don't thinkwe're seeing the effects of that
yet I think that is possibly tocome Right.
Speaker 1 (08:28):
Right, because this is a one big actuarial formula.
Somewhere there's a bunch ofgeeks in a room, somewhere that
know way more about this than wedo, I'm sure, but that are
really crunching the numbers andsaying, okay, we need this many
healthy people to pay for thismany sick people to you know to
get to the end of the day.
(08:52):
What's this many sick people toget to the end of the day?
What's it cost you every month?
And certainly that's a verycomplicated formula that I will
probably never understand.
I mean, I get the gist of it.
But so in Maine we've had somelegislative adjustments that
have really started to drive thechange in rates right, and
those are.
A lot of them are great.
A lot of them are improvements.
They are requiring the.
A lot of them are improvements,they know, requiring the
carriers to be offering certainthings, which is wonderful
benefit, but obviously thosecome at a cost right, so, yeah,
(09:15):
so what's been going on in thelegislature that's causing some
of those things?
Speaker 2 (09:18):
Just, you know, carriers are companies just like
everyone else, where you knowif they are being required to
take on an added risk, they'regoing to increase their cost,
and so who has to pay for that?
It's the members, right, yourpremium is going to go up.
So in 24, there were a lot ofsignificant state mandates that
went into place that carrierswere required to cover certain
(09:42):
services, and the one thatreally drove a lot of claim
costs was access to fertilitycare.
We've heard from differentcarriers that that added
anywhere from two and a half tothree percent on rates.
So say, we're talking about aan eight to ten percent average
(10:02):
trend increase every single yearfor pharmacy and medical, not
talking about everything thatwe've talked about already.
That's just talking aboutmedical and pharmacy.
When we start to add in thesestate mandates, we're talking
about another two and a half tothree percent that's added in.
And, like you said perfectlybefore, is these benefits are
(10:23):
great for people, right?
This is, this is a positive forpeople, but someone has to pay
for it, right?
So it's going to come back downto the members that are
enrolling in the policies topick up that cost Right.
Speaker 1 (10:33):
What other types of I mean?
Certainly fertility is the bigone.
We certainly know fertilitytreatment is not cheap, right,
and that's coming in there.
What are some of the other onesthat have been out there that
really have made the changes?
Speaker 2 (10:44):
Sure, I mean, there's a list of about five of them
here, you know.
Remove barriers to abortioncoverage.
Promote better dental care forcancer survivors.
Improve outcomes for personswith limb loss.
You know the main driver,though, that we've heard from
(11:06):
the carriers that were going toput the most risk on them to
increase their rates.
Speaker 1 (11:08):
Was the fertility?
Yes, absolutely interesting.
Yeah, yeah, I think, certainlyagain, as you get, the more you
have to cover, the more it'sgoing to cost to do absolutely
and it's a great benefit for thepeople that need it right now
that they had.
Speaker 2 (11:18):
Now they have a and obviously the carrier is going
to have prior authorizationrequirements and they're going
to put areas in place to makesure it's appropriate for that
employee or member, but with itbeing required to be covered.
Yeah, the rates are going toincrease.
Speaker 1 (11:35):
That's good Interesting, so talk to me.
The other thing we talked aboutwas this guaranteed reinsurance
program, which kind of when wetalked about this.
I'm like I didn't even knowthis existed, and I'm sure most
people do.
Can you explain what that, whatit is and what changed its?
Speaker 2 (11:50):
cause of issues you may not know, but today you're
paying about $4.
I think it's $4 per employeeenrolled that the carrier is
paying to Megara, which is themain guarantee access
reinsurance association.
So that's probably somewhat newto people.
They probably haven't heard ofMegara before.
But Megara, basically what itis is that all the carriers pay
(12:13):
into this reinsurance TPA, thisreinsurance program, and if they
, they are reimbursed forcertain high cost claims that
members incur.
So for 23, for example,carriers were reimbursed 100%
for all claims between 90K and275, right?
(12:33):
So if I had a cancer claim thatwas in that 90K to 275, the
carriers will be reimbursed bythe Megera for that claim right.
Speaker 1 (12:43):
So it's insurance for the insurance company, it's
insurance for insurance exactlyNow the parameters of Megara is
changing for 24.
Speaker 2 (12:51):
And this is a big cost driver, you know.
I think on average our smallgroup block got hit with about a
15% increase this year for 2024.
Speaker 1 (13:01):
Don't tell me that.
Speaker 2 (13:02):
You're coming to me in a couple months with changes.
Don't tell me that.
So one of the big changes thathappened with Megara is that
carriers will now be reimbursed75%, so not 100% anymore.
They're being reimbursed 75%for high-cost claims between
$135 and $275.
So we've lessened thecoinsurance that carriers are
(13:25):
getting that now it's $75, andwe've shortened up the window.
So carriers look at that andsay oh no, but again, like we
talked about, they're not goingto take on this added risk,
right?
This risk is going to be pushedback down to the payers who are
paying the premium.
So that's one of the reasonswhy we will see.
(13:48):
You know, I think an abnormalincrease in 24 is.
I think you know my note hereis, or is about one third of the
increase rates for 2024 hasspecifically come from Megara.
Wow, there we go.
Speaker 1 (14:05):
Can't wait to see our renewal.
Yep Can't wait to see ourrenewal.
So you know, aside from all ofthese legislative changes and
the mechanics of the changingmarketplace, we've been feeling
the increased cost of lifeeverywhere, and that doesn't
stop at the drugstore or at thehospital, right, All those are
going up as well, and that'sdriving added costs to the
insurance companies whichthey're passing on right.
Speaker 2 (14:26):
Exactly Everything's going up, right, and we had
talked about earlier normalwhether it's new technology, new
drugs, normal inflation I meanmedical and pharmacies anywhere
between eight to 10% any year,like that's what you should be
budgeting for.
Now there's it's different withall small groups, right?
Whether you bring on a fewyounger individuals at renewal,
(14:50):
maybe a couple older individualsdrop off, vice versa, right,
this can go both ways with lotsof different companies, but on
average, that's what it will be.
Now, when we start to talkabout everything we talked about
today merged market levelfunding, ichras, maine's one of
the oldest populations in thecountry, the Megara right you
(15:11):
start to tack on everything, youcan see how this average
increase of 15% to 18% is whatwe are seeing in the small group
market.
Speaker 1 (15:22):
Which is scary for all these small business owners
out there.
Certainly, I think we all feelthe need to be, or that we
should be, providing for ouremployees and making sure that
is.
What are you seeing?
What levers and switches areyou seeing people your clients
use to manage these costs?
Speaker 2 (15:38):
and these increases, yeah, so in the small group
market it's very rigid, so it'sall about shifting cost.
So I guess we can talk aboutshifting cost in two ways.
You can shift costs throughplan design, right, so you're
shifting cost to people that usethe plan, so not everyone hits
(16:01):
their deductible out-of-pocketevery year right.
It's a very few, so that'sprobably the most common thing
that we'll see.
Right, most brokers will showyou a bunch of alternates at
every single renewal.
You know, say, you got a $1,500deductible plan with a $5,000
out-of-pocket max, somethinglike that.
To take down some of that 15,you may be looking at a $3,000
(16:22):
deductible with, you know, a$9,000 out-of-pocket max.
Right, it's just shifting costsin that way.
Maybe you want to put a dualoption in, right, and you as the
employer can say, hey, I'mgoing to pay all my, I'm going
to pay 80% of the low costoption.
If you want to buy the higheroption, you know you pay the
difference, right?
(16:42):
So there's cost modelingchanges that you can do as well,
and that'd be the secondportion of shifting cost what
you as the employer are going todo with your contribution
strategy.
Speaker 1 (16:53):
And we see a lot of clients that are using HSAs and
things like that.
The employer is putting into anHSA to help you cover a higher
deductible or something likethat too.
Right, absolutely, because thatmay make a difference.
Speaker 2 (17:06):
High deductible health plans are very common in
the Northeast and we had talkedabout a lot of this last time
too, when we spoke.
But HSAs are.
I think that they're great.
They require more employeeeducation, but when you put them
in and employers are used tothem, I think they value them.
And the key piece about aqualified high deductible health
plan is pairing that with thehealth savings account.
(17:27):
Paying a lower premium and thenhaving an employer or yourself
fund an HSA that rolls overevery year is a great way to
build.
We call it the healthcare 401k.
Speaker 1 (17:37):
Sure, which that's a whole different conversation,
probably.
But what are you doing withthat education?
Because I know my employees inparticular.
They're great, but foreverright.
Everyone's used to just goingto the doctor and paying my $25
and walking out.
And how are you changing thatmindset of no guess what?
(17:58):
That doctor's appointment isnow $180 and you have to pay
that out of your HSA or out ofyour pocket until you get to
whatever point, right?
Speaker 2 (18:02):
Yeah, we think most of the time employees will just
see an open enrollmentpresentation, maybe once a year,
right?
Something that we do do atAcadia Benefits is that we can
provide recordings.
We call them, you know, benefiteducation recordings so we
could look at the benefit plansthat you have today.
We'll do a recording on what'scovered.
(18:23):
You know, anything that's newfor 24, anything to keep an eye
out for, right?
Hey, this copay went up herelike you're talking about, or?
Or, hey, you know it'sdeductible co-insurance now on
that tier four drug.
You know, keep an eye out forthat, things like that, right?
So then you can have thatrecording available for
employees to watch wheneverthey'd like.
Speaker 1 (18:41):
It's interesting, I know.
I think it's just reallychanging the mindset and
certainly I think healthcare istrying, the whole market is
trying to change people to beingmuch more consumer driven and
oriented and and saying, hey,maybe you can get your MRI.
You know, at the trailer downthe street, you don't have to go
to the big shiny hospital.
You know, an MRI is an MRIright.
You know, certainly I think wemany people might, for itself,
(19:04):
probably include is I need totake care of myself, I need to
have the best care, whatever,and that might mean going to the
Taj Mahal.
Speaker 2 (19:09):
It might not right, yeah, People, you know they
design the plan so people canmake their decisions.
Right, the message we alwayspush if it's not an emergency,
stay out of the emergency room.
Right, You're going to get todeductible co-insurance there.
Go to the urgent care.
Speaker 1 (19:35):
It's more often to co-pay, unless you're on a high
deductible health plan.
But it's going to be a muchlower out-of-pocket cost to you
if you hit that urgent care.
But of course, if it's anemergency, don't go to the
emergency.
Sure, sure, sure.
You know this is my brainspinning and all the things and
reasons that this is.
You know, things are soexpensive and certainly I think
we'll continue to see thingsevolve as the legislature acts,
as costs continue to rise, and Idon't think this is anything
that's going to go away anytimesoon, unfortunately.
But I think it's been reallyhelpful to me as a small
business owner to understand allof these things that are going
(19:55):
into it.
So thank you very much.
Speaker 2 (19:57):
Absolutely, and we were talking just, you know, as
your renewal coming out, or asyou know all you know employers
or renewals are coming up.
You know, make sure, whenyou're getting your quote right,
that you're able to seealternates from alternate
carriers, right?
I think, especially in thesmall group marketplace, you
really want to look at what'savailable to you, because you
(20:18):
never know where when a carrieris going to be competitive or
not, right?
We've seen some carriers bevery competitive in Q1 and Q2.
They've raised their rates aton for Q3, q4, right.
And now other carriers are morecompetitive.
So it's looking across theboard, looking at the plan
options and the carriersavailable.
Speaker 1 (20:35):
One of the things you've been great about is
giving us that spreadsheet with.
Speaker 2 (20:38):
I feel like 150 options.
All right, then we get on thecall and narrow it down Right,
which?
Speaker 1 (20:42):
usually I look at about four columns, right, I
really don't care about all this, but it's really helpful to see
that and see what's out thereand so that you know, and
certainly we've talked withmutual clients and said you're
going to get that, You're goingto have the 150 options to
choose from, which is reallyhelpful when trying to make
decisions, and that's when thatplan, design and things like
that kind of come into place.
So good.
(21:03):
Well, thank you so much, Connor.
It's great to have you back andchat about this brain numbing
topic, for sure.
Speaker 2 (21:09):
We can do it again, so thanks for having me.
Speaker 1 (21:10):
Well, we'll do it again.
For sure, there's plenty more.
Maybe that you know thehealthcare 401k.
Speaker 2 (21:15):
Yes absolutely.
Speaker 1 (21:16):
That's one to have too, for sure, so awesome.
Well, thank you very much forjoining us.
Be sure to like, follow, share,subscribe, rate, review
everywhere you are.
If you have any questions forus, you trailscom, we're happy
to get you in touch.
How do people get in touch withyou, connor?
What's the best way?
Instagram?
Speaker 2 (21:31):
email LinkedIn.
Speaker 1 (21:33):
LinkedIn.
Speaker 2 (21:33):
Connor Kennedy, katie benefits.
You can always reach out,contact us through our website
as well, and then someone fromKatie benefits will get in touch
with you, mostly same day.
Speaker 1 (21:41):
Awesome.
Well, thanks everyone forlistening and we'll see you next
week.
Thanks for listening to thisweek's episode of a small
business, big world.
This podcast is a production ofPaper Trails.
We are a payroll and HR companybased in Kennebunk, maine, and
we serve small and mid-sizedbusinesses across New England
and the country.
If you found this podcasthelpful, don't forget to follow
us at at Paper Trails Payrollacross all social media
platforms and check us out atpapertrailscom for more
(22:02):
information.
As a reminder, the views,opinions and thoughts expressed
are the hosts and guests alone.
The material presented in thispodcast is for general
information purposes only andshould not be considered legal
or financial advice.
By inviting this guest to ourpodcast, paper Girls does not
imply endorsement of oropposition to any specific
individual, organization,product or service.
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