The Patient Protection and Affordable Care Act holds two significant changes for the small group market taking effect for plan year 2016:
- A mandatory definition of “small employer” as those employers with 100 or fewer full time equivalent (FTE) employees. Section 1304(b)(3) of the Affordable Care Act afforded states the option – which all exercised – to set the metric at 50 or fewer employees for plan years 2014 and 2015.
- The delayed phase in under 2014 federal transition relief guidance of the large employer shared responsibility mandate. Under the guidance, the requirement that employers offer most employees health coverage meeting minimum benefit and affordability standards encompasses employers with 50-99 FTE employees starting in 2016.
Both alter the post-Affordable Care Act landscape of the small group market starting next year by expanding its parameters and providing greater incentive for small employers to offer health coverage. What remains to be seen is whether they will operate to expand small employer participation in the Small Business Health Options Program (SHOP) that all state health benefit exchanges must have in place unless they opt to combine their individual and small group exchanges as authorized by ACA Section 1311(b)(2). SHOP enrollment has been very weak in nearly all states relative to small group market as a whole.
A larger and more compulsory small group market could potentially boost SHOP’s prospects. But it won’t address the lack of strong economic inventive for small employers and their brokers to engage with the SHOP. The SHOP is predicated on pooling the purchasing power of small employers to drive down premiums that many small employers perceive as unaffordable. Gaining that purchasing clout with small group health plan issuers requires SHOPs first bring a lot more covered lives to the bargaining table – the classic chicken and egg conundrum.
Meanwhile, 17 business groups and the National Association of Health Underwriters have asked the U.S. Department of Health and Human Services in a February 18, 2015 letter to postpone implementation the 2016 mandatory definition of small employer to 100 or less employees to 2018, warning it would produce market disruption among health insurers that could limit employer coverage options as well as potentially lead to premium increases.
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