Payers wondering about competition under health reform might look to Denver, where underwriting regulations and a fair amount of provider concentration has left the commercial insurance market mostly divided into quarters.
The regional market may also be a barometer for the Affordable Care Act's goal of insurance competition leading to cost-curve bending, as full guaranteed issue rules take effect in Colorado along with exchange enrollment, according a Center for Studying Health System Change (HSC) analysis funded by the Robert Wood Johnson Foundation.
Anthem, Cigna, UnitedHealth Group and Kaiser Permanente each have just over 20 percent market share in greater Denver -- a market that gradually adopted reforms and regulations since the 1990s. Colorado now has guaranteed issue in the small group market and for child-only individual plans, a rate review process and rating restrictions on gender and medical history.
Denver's economy largely avoided the national recession, avoiding a mid-2000s real estate boom and having only a small manufacturing industry, while regional employers tend to be small or mid-size and have relatively young workers increasingly receiving leaner health benefits. HSC policy researcher Laurie Felland and colleagues estimated that about 20 percent of large firms and 30 percent of small employers in Denver have high-deductible health plans, with the average employer contributing between 65 to 75 percent of premiums.
And many of those employers are mostly shopping based on price, according to the HSC. "90 percent of employers, when they look at the insurance companies, think they all look the same," one Denver area benefits consultant told the HSC, noting as an exception that Kaiser Permanente tends to offer premiums 10 percent lower on average. "Employers don't see distinguishing characteristics across the carriers" -- perhaps because the characteristics of the four largest health systems are also quite similar.
Four health systems treat 75 percent of the region's population and the larger ones have obtained payer contracts requiring full coverage of outlier claims, the HSC found. The trend of hospital-owned physician practices is also starting to increase in Colorado, with one health plan executive telling the HSC that approximately 20 percent of the insurer's physician contracts are with hospital-employed doctors.
All of that may offer a window into consumer satisfaction and insurer sustainability under the ACA nationally. "Given the relatively lean benefits in this market, will changes to meet reform requirements contribute to premium rate shock, reducing affordability and discouraging young, healthy people from gaining coverage?" asked the center's Felland, a former analyst at Massachusetts Division of Health Care Finance and Policy. (Although the state insurance exchange will allow all federally-qualified plans to be sold, the state also has rate denial authority.)
Another question is the changing role of brokers -- or if their business will change that much. One consultant called Denver's small group market a "broker-driven marketplace." Anthem Blue Cross and Blue Shield sells small group products solely through brokers, and the state's ACA CO-OP -- another challenge to the current order -- recently signed an agreement with a brokerage network.
If defined contribution trends are reducing the role for insurance brokering in the small group market, is it possible, Felland asked, that brokers may follow the new need and funding for consumer education in the individual market?