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

10 Pages Posted: 27 Mar 2013

See all articles by Amy Monahan

Amy Monahan

University of Minnesota - Twin Cities - School of Law

Daniel Schwarcz

University of Minnesota Law School

Date Written: Spring 2013

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

Monahan, Amy and Schwarcz, Daniel B., Limiting the ACA's Threats to Small Group Health Insurance Markets (Spring 2013). Risk Management and Insurance Review, Vol. 16, Issue 1, pp. 25-34, 2013. Available at SSRN: https://ssrn.com/abstract=2240102 or http://dx.doi.org/10.1111/rmir.12001

Amy Monahan (Contact Author)

University of Minnesota - Twin Cities - School of Law ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

Daniel B. Schwarcz

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://www.law.umn.edu/profiles/daniel-schwarcz

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