Don’t expect those hard-to-sell group health plans to become any more affordable for your small business clients next year.
A new survey of health insurance brokers from Morgan Stanley reveals that rates for small group healthcare are rising in excess of 6%, the largest reported hike since the investment bank’s research team first started its quarterly surveys of brokers in 2010.
Generally, Morgan Stanley said, rate increases never top 3% over the preceding period.
Some insurers, including Aetna and UnitedHealth Group, are even increasing their premiums in excess of 10%, the survey found.
Researchers attribute the high increase largely to the advent of the Affordable Care Act, including new, stricter coverage requirements as well as the taxes and fees being assessed in 2014. However, Morgan Stanley pointed out that the still-struggling economy and decrease of medical utilization rates are also behind the steep rate increases.
The increases affect areas of the US disproportionately, with Delaware, Michigan and Minnesota experiencing the biggest annualized spike—35%; 30%; and 50%, respectively.
The rate increases spell bad news for Scott Leavitt, owner of Boise-based Scott Leavitt Insurance, who depends on small business clients for a healthy profit.
“Everything companies had to keep rates reasonable are now gone—rating classes, annual limits—and now the only health question you can ask is if an employee is a smoker. This is going to make rates go through the roof,” Leavitt said. “A lot of us do a lot of employer business, and now they’re either choosing to drop their coverage or losing their coverage because of the law.”
Small group clients’ decision to stop offering health coverage only makes a hard situation more difficult, Leavitt added, thanks to other provisions in the healthcare law.
“With the medical loss ratio, our commissions were already cut almost in half overnight. We have to pick up over two clients to make as much money as we were before,” he said.
“Our bottom line is that our job is to help clients and take care of the situation to best suit their needs, but it’s getting harder. Usually I’m an optimist in this industry, but it’s not looking too good anymore.”