Employer groups are urging repeal of the Affordable Care Act’s expansion of the small group market to include groups up to 100, due to occur in January 2016, and are supporting legislation to keep the definition of small group at 50 and fewer employees.
The problem, they say, is that businesses with 50 to 99 workers will be subject to the employer mandate in 2016, and some of them will have to buy coverage from the small group market, where many policies are more expensive because they are regulated the same way as individual policies are under the ACA.
Meanwhile, larger companies with 100 and more workers, also subject to reform’s pay-or-play mandate, will be free to buy large-group coverage; also, larger (100+) companies are in a better position to self-insure their health benefitss, resulting in freer and more economical coverage options.
Coverage for individuals and small businesses have more restrictive rating rules, and they must provide essential health benefits that large group plans do not have to supply.
Healthier Groups May Opt to Self-fund
Some companies in the 50-99 group will react to the employer mandate by self-funding if they have young, healthy populations, while those with older, sicker populations will be relegated to the Small Business Health Options Program to buy more expensive small-group coverage. In turn, that will change the composition of the risk pool, driving up premiums even more in that market, said Alissa Fox, senior VP for policy and representation at the Blue Cross Blue Shield Association. She and others spoke at a briefing for reporters sponsored by the Alliance for Health Reform in Washington, D.C., on June 12.
Two one-year delays in the employer mandate have affected companies in the 50-99 group: the first stopped the employer mandate for all large employers throughout 2014. The second delay exempted companies in the 50-99 group from the employer mandate until the end of 2015. That mandate requires applicable large employers to provide health insurance or pay a tax.
The Obama administration has not been moving on an administrative fix, Katie Mahoney, director of health care policy at the U.S. Chamber of Commerce, said.
Congress is moving legislation (S. 1099 in the U.S. Senate, and H.R. 1624 in the House) to indefinitely keep the current definition of small-group market as 1-50 employees, and to give states the flexibility to expand the group size if the market conditions in their state make that necessary. A number of trade groups, including the National Federation of Independent Business, National Association of Manufacturers and the U.S. Chamber of Commerce, support the proposal.
States can allow grandfathered small-group policies to continue until 2017 in spite of not covering the insurer mandates, but only in states that allow insurers to renew existing noncompliant policies. But that form of relief will not be available to newly written small-group policies. New entrants will have to get compliant small-group coverage, purchased from or outside a SHOP exchange.
Eight million people are covered by small businesses in the 50-99 category. After groups leave to go self-fund, according to Fox’s estimate, those that remain will see an average 18-percent increase in their premium.
The amount of small business tax credits used has been far lower than estimates from the U.S. Congressional Budget Office, Terry Gardiner, an adviser for the Small Business Majority, said. Sales of small group insurance coverage on SHOP exchanges (in operation since 2014) have been low. That is because the credit is too small to justify the amount of paperwork it takes to get it, and the credit remains available for too short a time, Gardiner explained.
Companies with 10 to 25 employees get the highest tax credits for use on the SHOP exchanges. Above 25 workers, subsidies are phased out, up to 50 employees, after which subsidies disappear entirely.
While national insurers are in virtually every state’s large group market, they are only in a portion of the small group markets. This could lead to higher premiums due to a lack of competition, and deprive employers from presenting a choice of coverage options to employees, according to a letter supporting S. 1099 and H.R. 1624 signed by employer organizations.