Why Is Empire Dropping Plans In New York?

Professional Employer Organizations Help With Empire Dropping Plans in NY

Empire Blue Cross Blue Shield has long been one of New York’s premier small business health insurance carriers. Known for an expansive network and fairly priced EPO products, Empire is a household name that New York’s employees recognize and desire. As of April 1st, 2012 Empire is reportedly reducing the amount of plans available to Small Businesses, which in New York includes all employers with 2-50 employees enrolled in healthcare. The overriding sentiment in the broker community is that the policies planned for discontinuation are of the most desired by their clients: Empire EPO Stepped, Empire EPO Essential Options 1-9, Empire Prism EPO, amongst many others. 

Why is Empire leaving the Small Business market in New York?

Three terms can sum this up: Profitability, Community-Rated, and Guarantee Issue. Profitability: Actually earning money after covering costs Community-Rated: Applies to all New York small employers with 2-50 employees enrolled in health insurance. It means a health insurance carrier must base the rates it gives to a company largely off of the overall health and welfare of its surrounding community, in this case, all Small Businesses in New York. This is the opposite of underwriting, which includes collecting information on the employee population of a company in order to assess the risk that specific company presents from a health insurance perspective and assigning a set of rates that reflects that specific risk. Underwriting is still allowed for Large Groups with over 50 enrolled employees. Guarantee Issue: Applies to all New York small employers with 2-50 employees enrolled in health insurance. It means a health insurance carrier must offer insurance to all qualified companies that approach them. Health Insurance is not guarantee issue for Large Groups with over 50 enrolled employees. The latter two terms create a perfect storm for obliterating a health insurance carrier’s long term profitability. They essentially abolish the two biggest tools an insurance company has to defend the cost of service for its existing client base: Choice, and Mathematics.

So … Why is Empire leaving the Small Business market in New York!?

Quite simply, they can’t turn a decent profit, or rather their desired profit, in New York under the Small Business market conditions. So they face a decision: remain in an environment where they are stripped of their ability to properly underwrite risk and lose millions upon millions, or bail on the Small Business market, and reinsert themselves in an environment that is more opportunistic for profitability; namely New York’s Large Group market along with the help of the Professional Employer Organizations. Check out part 2 of this article which describes the coupling of a PEO with Blue Cross Blue Shield.