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Limiting the ACA's Threats to Small Group Health Insurance Markets
Author(s) -
Monahan Amy B.,
Schwarcz Daniel
Publication year - 2013
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/rmir.12001
Subject(s) - subsidy , incentive , business , government (linguistics) , adverse selection , order (exchange) , limiting , value (mathematics) , public economics , finance , labour economics , economics , market economy , mechanical engineering , linguistics , philosophy , engineering , machine learning , computer science
We identify three threats to small group health insurance markets that may result from the 2014 implementation of certain provisions in the Affordable Care Act (ACA). First, small employers with predominantly low‐income employees may tend to opt out of small group markets because their employees will be better off with subsidized individual coverage. Second, small employers with employees of heterogeneous income levels will have strong incentives to offer coverage that is either “unaffordable” or fails to provide “minimum value” in order to preserve the availability of government subsidies for their low‐income employees. Finally, small employers that continue to offer group plans will face increased incentives to self‐insure those plans, further contracting small group markets and subjecting them to adverse selection. Collectively, these forces may destabilize small group markets and increase the ACA's fiscal cost. We therefore conclude by offering various reforms aimed at offsetting these risks and preserving the viability of small group markets.