Floor of small group market may be rising

The small group market may be undergoing a redefinition. Section 1304(b(2) of the Patient Protection and Affordable Care Act defines small employers as those having between 1 and 100 employees. (Through 2015, states have the option to set the upper limit at 50 employees.)

The marketplace could be raising the single employee floor on a de facto basis, according to this Bloomberg story reporting those working for small employers are increasingly purchasing individual coverage though state health benefit exchanges. The shift is accelerating among the smallest employers, Ana Gupte, an analyst at Leerink Partners LLC, told Bloomberg, adding it’s “happening faster than expected.”

The implication is the low end of the small group market – generally defined as organizations with fewer than 10-20 employees — is being cannibalized by the individual market, where the incentives for participation are far stronger. That would effectively change the practical definition of the small group market to a range of between 10 or 20 and 100 employees.

How this will affect state small group markets over the next few years remains to be seen. It could adversely impact the small employer side of the state exchanges — the Small Business Health Options Program (SHOP) – by significantly shrinking the pool of small employers that might potentially enroll. That could prompt all but the largest states to exercise their option under Affordable Care Act Section 1311(b)(2) to merge their individual and SHOP exchange functions. States also have the option starting in 2017 to offer large group plans on their exchanges as allowed under Section 1312(f)(2)(B)(i). But with the growth of private exchanges in the large group market, it’s doubtful the public state benefit exchanges would be appealing to large group plans.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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Frederick Pilot

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