Aetna to cover small businesses

Five years after exiting the small-business market in North Carolina, Aetna is back.

The health insurer, one of the nation's largest, will begin covering employers with as many as 50 workers on Oct. 1.

It will join a market dominated by two companies: Blue Cross and Blue Shield of North Carolina, which insures about 61 percent of the state's 45,375 small groups; and UnitedHealthCare of North Carolina, covering about 18 percent. Twenty-six other insurers cover the rest.

"I think it's awesome," said John McDonnell, a managing partner with Progressive Benefit Solutions. His Raleigh company helps businesses find and manage benefits such as health insurance. "It adds another player in that space that can really answer the small employers' challenges."

Aetna plans to offer 12 health insurance plans, including three high-deductible options tied to health savings accounts. Brokers can design two-plan packages for employers with fewer than 15 workers, and three-plan options for companies with 15 to 50 employees.

That flexibility will be the insurer's competitive advantage in North Carolina and may pressure competitors to follow its lead, McDonnell said. "They could take the market by storm on this," he said.

Phil Gruber, president of RPG Benefits Solutions in Raleigh, agrees that flexibility might be key for Aetna, but he is reserving judgment until the insurer's rates come out next week.

Squeezed by years of double-digit premium increases, clients are asking RPG to explore every avenue for their upcoming renewals -- but they generally don't want to change insurers every year, he said.

What's more, many are comfortable with United or Blue Cross. "I don't think clients will switch unless there's a compelling price difference," Gruber said. "Somebody's not going to leave Blue Cross for 3 [percent] or 4 percent less from Aetna."

Aetna expects its premiums to be competitive with other insurers in North Carolina, but it doesn't intend to significantly undercut the market price.

"We've done that before, and it's not a good long-term strategy," said Tom Grote, who oversees Aetna's small and midsize business in North Carolina.

The brokers approve. Although price is critical, McDonnell and Gruber said they are cautious when insurers price their products so low that later increases are inevitable.

That's what happened at Aetna in the late 1990s. On an earlier foray into North Carolina's small-business market, the company undercut its competitors to build business, then boosted its prices significantly, alienating customers, Grote said.

In 2001, after three large acquisitions between 1996 and 1999, the insurer "was in dire financial straits," and decided to exit its less profitable business lines, spokesman Walt Cherniak said. In North Carolina, it stopped marketing its products to small businesses and focused on adding larger business customers in the Triangle. Aetna has about 200,000 customers in North Carolina, with about 40 percent in the Triangle.