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Empire Blues drops many health insurance products for small businesses

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NEW YORK—Empire Blue Cross Blue Shield notified brokers that it is cutting the number of health insurance plans it offers to small groups as of April 1, and is slashing the compensation it pays to brokers to sell the remaining small group products.

Empire also said it has requested premium rate increases from New York state regulators.

While Empire issued a statement saying it has “no intentions to withdraw from the New York Small Group market,” brokers say Empire's actions, in effect, mean just that. Empire will only offer expensive, noncompetitive products to New York City small businesses with between two and 50 workers.

“They will pull the majority of sellable products, and the four or five left are all ones people don't really care about,” said one broker.

Empire is not alone in facing extreme conditions in the small group market that make it difficult to turn a profit. The insurer experienced its first year-over-year financial loss in its small group business, a trend “that cannot be sustained,” Empire said. Since late 2006, several insurers exited the small group market in New York City, including CIGNA and HealthNet. Empire's de facto departure leaves Oxford Health Plans, EmblemHealth, Atlantis and Aetna selling health insurance to small business here.

Empire said its premium hike request to the state's Department of Financial Services reflected regulatory changes, increases in the cost of medical care and increased usage of health care services by members of its small group employer plans.

In a statement, Empire said it was “sensitive to the economic challenges facing small businesses and our goal is to offer affordable health insurance plans to New York's small businesses,” many of them struggling to offer insurance to their workers.

Because fewer small group employers are offering coverage, Empire's costs have increased, and the enrollees that remain in its risk pool are sicker and more expensive to insurer. It also is seeking rate hikes because provider charges have gone up, at the same time as New York State subsidies have fallen.

The specific products for the small group market that Empire is keeping after April 1 are EPO Essential Option 10, PPO Option 1, PPO Option 2, HMO/DHMO Option 12, and continued participation in the state's Healthy New York program. Because of a change in state regulations, all new Healthy NY enrollees can only buy a high-deductible plan after Jan. 1.

It is dropping Empire EPO Stepped, Empire EPO Essential Options 1 – 9, Empire Point of Service, Empire PPO Plus, Empire Total Blue PPO with Health Savings Account, Empire Prism EPO and Value EPO.

Aside from the shrinking of its product offerings for small businesses, Empire also is slashing its financial incentives for brokers to sell those products. Brokers had been earning a 4% commission on sales, which worked out to $22 to $24 per enrollee per month for small groups. After January 1, Empire is slashing that to a flat fee of $5 for each member per month.

Empire hinted that higher premiums are only short-term solutions.

“In the long term, serious collaboration with key stakeholders on new options and improved health reform initiatives will be essential to more affordable, sustainable coverage,” the insurer said in a statement.

Barabara Benson is a reporter for Crain’s New York Business, a sister publication of Business Insurance.