Tag Archive: large group

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. 

Wall Street Journal article details how employers could continue offering “tin” coverage next year

Today’s Wall Street Journal via Yahoo News reports large employers of 50 or more employees may opt to offer mini-med or “tin” metal value health plans to workers since the Patient Protection and Affordable Care Act mandates only individual and small group plans provide coverage for hospitalization and nine other categories of essential health benefits. Moreover, the WSJ article notes, some large employers with large numbers of low wage workers may risk paying a $3,000 penalty for each employee who opts out of this coverage and instead buys richer, subsidized coverage through a state health benefit exchange that includes all essential benefits.

Limited plans may not appeal to all workers, and while employers would avoid the broader $2,000-per-worker penalty for all employees not offered coverage, they could still face a $3,000 individual fee for any employee who opts out and gets a subsidized policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage workers such as retailers and restaurant operators, who are willing to bet that those fees would add up slowly because even with subsidies, many workers won’t want to pay the cost of the richer exchange coverage.

Small employers of fewer than 50 employees could also continue offering low value “tin” plans for nearly all of 2014 if payers exploit a previously reported loophole enables payers to continue offering individual and small group plans that fall short of providing essential health benefits and actuarial “bronze” metal tier value of at least 60 percent.

The low-benefit plans are just one strategy companies are exploring. Major insurers, including UnitedHealth Group Inc., Aetna Inc. and Humana Inc., are offering small companies a chance to renew yearlong contracts toward the end of 2013. Early renewals of plans, particularly for small employers with healthy workforces, could yield significant savings because plans typically don’t need to comply with some health law provisions that could raise costs until their first renewal after Jan. 1, 2014.

Low value coverage offered by large employers with sizable numbers of low wage workers runs counter to an underlying policy assumption baked into the Affordable Care Act that large group plans tend to provide relatively expansive coverage compared to small group and particularly individual plans.  Hence, the law prescribed minimum coverage standards for these plans, but not for the large group segment of the health insurance market.

 


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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