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Limiting the ACA's Threats to Small Group Health Insurance Markets

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  • Amy B. Monahan
  • Daniel Schwarcz

Abstract

We identify three threats to small group health insurance markets that may result from the 2014 implementation of certain provisions in the Affordable Care Act (ACA). First, small employers with predominantly low‐income employees may tend to opt out of small group markets because their employees will be better off with subsidized individual coverage. Second, small employers with employees of heterogeneous income levels will have strong incentives to offer coverage that is either “unaffordable” or fails to provide “minimum value” in order to preserve the availability of government subsidies for their low‐income employees. Finally, small employers that continue to offer group plans will face increased incentives to self‐insure those plans, further contracting small group markets and subjecting them to adverse selection. Collectively, these forces may destabilize small group markets and increase the ACA's fiscal cost. We therefore conclude by offering various reforms aimed at offsetting these risks and preserving the viability of small group markets.

Suggested Citation

  • Amy B. Monahan & Daniel Schwarcz, 2013. "Limiting the ACA's Threats to Small Group Health Insurance Markets," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(1), pages 25-34, March.
    • Handle: RePEc:bla:rmgtin:v:16:y:2013:i:1:p:25-34
    DOI: 10.1111/rmir.2013.16.issue-1
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    File URL: https://doi.org/10.1111/rmir.12001
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    References listed on IDEAS

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    1. Roger Feldman & Bryan Dowd & Scott Leitz & Lynn A. Blewett, 1997. "The Effect of Premiums on the Small Firm's Decision to Offer Health Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 32(4), pages 635-658.
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    Cited by:

    1. Robert Pozen & Anant Vinjamoori, 2015. "Self‐Funding of Health‐Care Plans by Small Firms: Risks and Reforms," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 18(2), pages 243-254, September.

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