Hartford Business Journal

www.HartfordBusiness.com May 30, 2016 • Hartford Business Journal 3 ConnectiCare's strategy shift: growing consumer focus By Matt Pilon mpilon@HartfordBusiness.com M id-sized health insurer ConnectiCare competes with the big dogs for in- state customers, and in recent years it's managed to stake out a dominant position in several challenging lines of business. Despite competition from the likes of Aetna, Anthem and United Healthcare, since 2014, ConnectiCare has taken and held Con- necticut market share leads in both Medicare Advantage plans and on the state's Obam- acare insurance exchange, Access Health CT. ConnectiCare's strategy to focus more attention on individual-consumer product lines, which aren't without their risks, has resulted in a significant shift in the company's revenue sources. While the insurer remains a player in selling employer-sponsored health plans, nearly half of its revenue now comes from "direct-to-consumer" products. That's up from 15 percent four years ago, said ConnectiCare President Michael Wise dur- ing an interview at the company's Farmington headquarters, which houses 750 employees, including executives, salespeople and call- center workers. An aging population and the Affordable Care Act's mandates have created the opportunity in the individual market, but ConnectiCare's decision to pursue it has been deliberate, Wise said. "There's nobody that's ignoring the direct- to-consumer business," Wise said. "The ques- tion is 'who's positioned best to take that on?'" He contends that ConnectiCare's virtu- ally singular focus on the state for which it's named gives it a leg up on national play- ers. While ConnectiCare's parent company is EmblemHealth, which is dominant in the New York market, ConnectiCare doesn't need to fret with regulations or competitive land- scapes in other states. And the providers and hospitals in its network are all a modest drive away from its corporate headquarters. "That's why we're going after it," Wise said. "It doesn't mean we think our competitors offer poor products because they have headquarters in other states, but the focus really matters." As part of its ongo- ing consumer-facing shift and to mark its 35th year in busi- ness, ConnectiCare recently tweaked its logo. New signage adorns the front of its headquarters. Six months ahead of the fourth annual Obamacare enroll- ment period, the company continues to play up its Nut- meg-native status. "We think of Con- necticut as more than just a spot on the map. We think of it as more than just a state. We think of it as home," Wise said in an announcement about the rebrand. Making it work ConnectiCare has been selling plans on Access Health CT since the exchange's 2014 inception. Anthem won the market share battle in the inaugural year, but ConnectiCare took the lead in 2015. In the most recent open enrollment period, which ended early this year, ConnectiCare further widened the gap, with approximately 57,000 enrollments to Anthem's approximately 37,000. Meanwhile, nonprofit HealthyCT had 13,000 and United Healthcare had less than 2,000 enrollees. Some insurers have cast doubt on the future of the exchange model. United Health- care announced in April that it would exit Connecticut's exchange and those in a num- ber of other states, after losing $720 million on that overall busi- ness in 2015. Aetna — which had initially intend- ed to join Connecti- cut's exchange, but pulled out before the exchange launched — disclosed that it lost as much as $140 million on its exchange plans in other states last year. Con nect iCa re's main exchange competitor Anthem has said it made money on exchanges last year, though it's unclear what its results were in Connecticut. ConnectiCare is profiting from its exchange business, and it intends to participate in the fourth open enrollment period that begins in November, Wise said. Proposed 2017 rates for both exchange and off-exchange plans will start trickling in to state insurance regulators soon. The exchange has been a winner so far for ConnectiCare, according to financial data the company provided to insurance ratings firm A.M. Best. Access Health products netted $12.3 mil- lion for the insurer in the exchange's inau- gural year and $13.6 million last year, A.M. Best data shows. Those products produced revenues of $140.2 million in 2014 and $199.1 million in 2015. Wise said exchange profit margins have been in line with his expectations. While some carriers are avoiding or rethinking their involvement with exchanges, Wise said ConnectiCare must help make the state exchange a success. "We looked at it from the standpoint of 'how could we not participate and make this work in Connecticut?'" he said. "We don't have the choice to say that things aren't work- ing so well in Connecticut, so I think we'll focus on Florida or Texas." That comment speaks to the difference between the Connecticut-focused insurer and some of its largest competitors, which operate in multiple states and could pull out of markets they don't like. The Medicare long game ConnectiCare is also leading Connecticut insurers in Medicare Advantage enrollments, but that hasn't done much for its bottom line over the past few years. ConnectiCare has booked net underwrit- ing losses in that product segment in four of the last five years, according to A.M. Best. Revenue has grown steadily over that period. "Federal funding pressures are significant and we expect that will remain the norm," Wise said. However, he said his company remains committed to the market. Though many insurers have been squeezed by the federal government's tightening of Medi- care Advantage payments, insurers are play- ing a long game, according to Bridget Maehr, senior financial analyst with A.M. Best. Continued Viewpoints Is ConnectiCare CEO Michael Wise concerned about the proposed mergers between Hartford-based Aetna and Humana and Bloomfield- based Cigna and Anthem? "Well, big competitors getting bigger makes it tougher," he said. He declined to delve into specifics on what the proposed deals could mean for ConnectiCare's specific business lines and how it might respond strategically. www.kelsercorp.com/cybercrime www.kelsercorp.com 111 Roberts St, Suite D East Hartford, CT 06108 860 610 2200 Patients trust you with their medical records. Secure them. P H O T O | S T E V E L A S C H E V E R ConnectiCare President Michael Wise at the insurer's Farmington headquarters, which now bears a new logo, part of a rebranding timed with the company's 35th anniversary.

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