Hold the Cork for The Connector

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The Connector made a “big” announcement about the Business Express program today– that all carriers are now selling in the exchange. But a little context is needed before we throw a party. In a September 2010 paper, I addressed the limited benefit of the Business Express program in the Connector.

…Business Express (BE) also suffers from design limitations and does little to address the underlying reasons behind premium increases. It does reduce the monthly fee that small employers typically pay to third-party administrators from $35 per subscriber to $10 per subscriber, saving employers roughly $300 per employee per year. However, this reduced fee is not unique to the Con­nector. The Massachusetts Business Association contends that it offers a similarly low-priced plan.

The truth is that the Connector’s Business Express program does little to add value for small businesses. A small administrative fee savings may be nice, but the program design will not bend the cost curve. In that same paper I outline the many instances where the Connector has moved to limit choice and competition in the exchange, not expand it.

In the future, the more powerful incentive for small companies to join the Connector may be the state tax credits that are on the table (and future ones under the federal ACA). The fact that the Connector is the exclusive distribution channel of these tax credits should concern any person that believes that market forces can help to control costs. (We live with the lack of true market forces in our current health care system. When is the last time you called a doctor to ask for a quote before a visit?) When a quasi-public agency with regulatory power is given an exclusive benefit, we all should think long and hard about its impact on the aggregate insurance sector. Would you like this Cadillac insurance plan or that Cadillac insurance plan?