Anthem is the first big insurer in California to publicly pass on the small-business health insurance pool.

By Chad Terhune
July 19, 2013, 5:57 p.m.

Health insurance giant Anthem Blue Cross is spurning California’s new insurance market for small businesses, a potential setback in the state’s rollout of the federal healthcare law.

Anthem, a unit of WellPoint Inc., is California’s largest insurer for small employers. The company’s surprising move raised concerns about the state’s ability to offer competitive rates and attract businesses to its new Covered California exchange that opens Jan. 1.

The federal Affordable Care Act left it up to health insurers to decide whether they wanted to sell in these government-run marketplaces.

Friday’s disclosure made Anthem the first big insurer in California to publicly pass on the small-business pool. Some other big names, such as UnitedHealth Group Inc. and Aetna Inc., have already opted out of California’s larger exchange for individual consumers.

Overall, most industry experts have not expressed alarm about the handful of big companies so far that have chosen to sit on the sidelines. They say insurer participation has been fairly solid across the country thus far and next year’s premiums have come in lower than expected in California and other states.

The level of insurer competition “has been a pleasant surprise in a number of states and in other places it’s been more mixed,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

Anthem’s decision in California underscored that the small-business exchanges are the most susceptible to a lack of interest among insurers.

The state’s largest for-profit health insurer isn’t abandoning the small employer market, which is limited to firms with 50 or fewer workers. It said it would keep selling coverage to small companies outside the exchange, and it also remains one of 13 health insurers that will offer policies to individuals in Covered California.

Anthem led California with 31% of the small-employer market in 2011, according to the most recent Citigroup data. Kaiser Permanente was a close second with a 28% share, followed by Blue Shield of California with 18% of small firms. Both Kaiser and Blue Shield are expected to participate in the small-group exchange.

Nonetheless, Anthem’s move caught many observers off guard.

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