Small Firm Self-Insurance Under the Affordable Care Act

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The Affordable Care Act changes the small-group insurance market substantially beginning in 2014, but most changes do not apply to self-insured plans. This exemption provides an opening for small employers with healthier workers to avoid broader sharing of health care risk, isolating higher-cost groups in the fully insured market. Private stop-loss or reinsurance plans can mediate the risk of self-insurance for small employers, facilitating the decision to self-insure. We simulate small-employer coverage decisions under the law and find that low-risk stop-loss policies lead to higher premiums in the fully insured small-group market. Average single premiums would be up to 25 percent higher, if stop-loss insurance with no additional risk to employers than fully insuring is allowed—an option available in most states absent further government action. Regulation of stop-loss at the federal or state level can, however, prevent such adverse selection and increase stability in small-group insurance coverage.

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Publication Date:
November 28, 2012
Authors:
Matthew Buettgens, Linda J. Blumberg

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Related Topics
Health Care Coverage