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The Risk of Unregulated Reinsurance to the Small-Group Market

In a new Commonwealth Fund issue brief, the Urban Institute's Matthew Buettgens and Linda J. Blumberg examine the potential that low-risk reinsurance or "stop-loss" policies—purchased by employers that self-insure to avoid paying unexpectedly large claims—might reduce participation in the fully insured small-group market and thereby increase premiums. Based on their simulations of small firms' decisions on health insurance coverage under the Affordable Care Act, the researchers find that the average single premium would be up to 25 percent higher if stop-loss insurance with no additional risk to employers than fully insuring is allowed—an option currently available in most states.

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