By George Basharis, J.D.
The status of the small-group employer insurance market in light of the implementation of reforms under the Affordable Care Act is the subject of a recent issue brief authored by researchers at Wake Forest University School of Law and Virginia Commonwealth University. The brief discussed how ACA reforms have affected prices, enrollment, and competition in the small-group market. According to the authors, enrollment has declined overall, price increases have been similar to those seen in the larger-group market, and competition remains robust overall.
Enrollment. Enrollment has declined steadily since implementation of the ACA’s market reforms in 2014. Some of the decrease may be the result of small firms choosing to self-insure, but the trend cannot be measured comprehensively using available data sources. The authors note that it is important to understand that this decline began before the implementation of the ACA. However, the decline in enrollment does not mean a decreasing set of options for small-firm owners and workers. The ACA actually led to a large increase in coverage for small-business employees, because many were eligible to enroll in the ACA’s subsidized individual market or in expanded Medicaid, according to the brief.
Price increases. Price increases for those who remain in the small-group market have been similar before and after the ACA reforms and comparable to trends in the large-group market. Although the ACA has not reduced the cost of small-group insurance, it has made it more comprehensive and accessible. The authors caution that higher premium increases in the small-group market in 2015 and 2016 could be a cause for concern if they reflect adverse selection, such as healthier persons leaving the market or sicker people joining the market. However, overall claims in the small-group market were lower than those in the less-regulated large-group market and premiums were similar in both markets in 2015 and 2016.
Competition. The number of insurers competing in the small-group market can be an indication of market health. The authors studied insurers with at least 1,000 members. Prior to the ACA reforms, there were about 500 credible insurers, but by 2016, the number had dropped to 409, while there was little change in the large-group market. However, the decline in small-group insurers to a certain extent reflects consolidation that already had been occurring before the reforms. The authors note that the ACA reforms were not expected to bring substantial new competitors into the market so the decline is not unexpected. Overall, competition appears to be strong as of 2016.
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