Georgetown and Urban Institute Experts Assess Impact of ACA on Small Group Market and Future Issues to Watch
Researchers at Georgetown University's Center on Health Insurance Reforms (CHIR), in partnership with the Urban Institute and supported by the Robert Wood Johnson Foundation, have released a new report examining trends in the market for small business health coverage. The number of small businesses offering health insurance coverage has been steadily declining over the last decade and more, but there has been speculation the Affordable Care Act (ACA) could potentially accelerate that decline. To understand what is happening on the ground, researchers spoke to insurance company executives, brokers and state insurance regulators in 5 states - Arkansas, Montana, New Mexico, Pennsylvania and Vermont - where early data suggest that enrollment in the small group market is declining at a faster pace than the national average.
The authors find that while the ACA provides more consumer protections to small businesses and their employees, it has also created new uncertainties and changed incentives for how small group health plans are designed and offered. Key findings include:
- SHOP marketplaces. Small employers show little interest in the SHOP and few have enrolled. Stakeholders do not believe the SHOP adds value for small employers, and employee choice is seen as too complex and administratively burdensome.
- Grandfathered and "grandmothered" plans. Many small employers have remained on plans that were in existence before the ACA was enacted. Others have stayed enrolled in the plans they were in 2013 (grandmothered), and are allowed to renew them until 2017. In both cases, the plans do not have to comply with key ACA market reforms, including rating restrictions and requirements to cover essential health benefits.
- Individual (non-group) marketplaces. Small employers have new incentives to drop their group plan and send employees to the individual marketplace, in some cases with a federal subsidy. But stakeholders have not observed dramatic shifts in this direction yet.
- The year 2017. Stakeholders believe that many small employers, particularly those with young and healthy workers, will have new incentives to change their coverage in 2017, when they are required to shift to ACA-compliant plans, or in the case of employers with 51-100 employees, become subject to small group market regulation. If many young, healthy groups leave the small group market, the resulting adverse selection could cause premiums to rise for those businesses that remain.