Health Payers Contend for Share of SMB Health Insurance Market

November 29, 2018 - Changing government regulations and demands for benefits in the small to medium business market is likely to lead to consolidation and place a growing emphasis on creating innovative health plans, according to a recent Edifecs report.

With 409 active health payers in 2018 (up from 402 in 2013), the small and medium business market (SMB) is a crowded and varied space comprising 83 percent of all available health insurance plans despite representing only 11 percent of covered lives in the United States, writes Senior Analyst Mary Swaykus, who analyzed five-years of data from AIS Health.

Collectively, these payers offer all lines of business, thought the study focused on four: commercial risk, self-funded/administrative services only (ASO), Medicare and Medicaid (managed, Fee-for-Service (FFS).

Combined, commercial risk and ASO payers make up 51 percent of SMB payers but account for a total of 13 million lives. In contrast to the private sector, 87 percent of SMB payers offer some kind of government line of business, such as Medicare Advantage, managed Medicaid, Duals and SCHIP. Altogether, government lines of business account for 23 million lives or 64 percent of SMB.

The recent push toward value-based and payment reform has significantly impacted the creation of provider-sponsored health plans (PSHPs) — provider-led or -own plans — which represent 46 percent of all health plans and 53 percent of the SMB market. Nearly all PSHPs (94%) cover few than half a million lives.

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While Blue Cross Blue Shield plans represent three percent of the market, they constitute only nine percent of all US payers. There are 44 such plans in the nation covering 99.4 million lives — or 30% of all of them in the country.

With 71 percent of payers now claiming a stake in the SMB market (an 18-percent uptick since 2013), the latter has become predominantly not-for-profit, which the report attributes to the overall influx of PSHPs for whom 4 of 5 report that tax status.

With 43 percent of payers offering a dual-eligible plan, duals have become the most common of all SMB lines of business. That said, at 735,392 lives the dual line of business accounts for only two percent of SMB lives. All 51 State Medicaid agencies — including the District of Columbia — fall into the SMB market.

Across the country, the SMB market is relatively evenly distributed, with the greatest number of payers operating in the western region. Eighty-seven percent operate in a single region; 78 percent in a single state. Of the 41 payers that operate plans in multiple regions, twenty do so in all four regions.

Meantime, states with higher populations have more SMB plans. California has the most SMB payers at 62 whereas Alaska has 11. There are exceptions. Wisconsin ranks 20th by population, but 4th by SMB payers while Oregon falls into 27th by population and 8th by SMB payers.

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Not unlike the complete SMB market landscape, government plans constitute the vast majority of small payer lines of business at 88 percent.

Of the 197 payers offering government lines of business, 66 offer Medicare Advantage and 60 managed Medicaid. Once again, duals are the most represented line of business with 58% of SMB PSHPs offering Dual-eligible plans.

Small payers offer plans in all four US regions and the territory of Puerto Rico. With 75 and 73 payers, the northeast and southern regions, respectively, outpace the western and central regions, with 62 and 55 payers. Most small payers operate in only one state. During the last five years, 92 net new plans entered the small market. These new plans average 6,000 covered lives, with the largest covering nearly 45,000 lives. Among these 92 plans, eight started just this year.

Most medium payers operate in only one state, except for 41 that do so in multiple states, and 10 in at least 40 states. The vast majority operate in one region. Over the last five years, 13 net new plans, averaging 105,000 covered lives, entered the medium market. The largest has nearly 416,000.

Meantime, PSHPs catapulted to the top of the SMB market, with the largest membership experiencing double-digit growth over the last five years. Among those in existence since at least 2013, the average five-year CAGR was a healthy 7.6%, with the largest reaching a staggering 65.38% CAGR during this period. In fact, 57 payers experienced double-digit growth over the last five years, with 23 plans achieving more than 20% CAGR and 4 plans attaining more than 40% CAGR.

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The southern and northeast regions have the most PSHPs in the SMB market with 68 each, while the western and central regions have 48 and 51, respectively.

There are 13 BCBS plans in the SMB market, which represents only three percent of the total market, but 33 percent of the total BCBS market of 44 plans. Of the 13 BCBS SMB payers, four payers have more than 400,000 lives while two were considered large in 2013 with a total enrollment of just over 500,000. However, all 13 BCBS SMB payers fall within the medium segment in 2018.

Between 2013 and 2018, the SMB market saw 111 new entrants, 105 of which were net new payers, 88 percent of which entered the small segment. Meantime, during this same five-year period, 104 payers left the SMB market. Forty-eight percent did so following consolidation or acquisition while 39 percent shuttered operations. Between 2013 and 2018, 13 medium plans experienced an increase in membership and were elevated to the large segment by 2018.