Small-Group Market Expansion Hurts Affordability, Stability Of Coverage

by Courtney Jay

September 9, 2015

Big changes are coming for small employers and mid-size businesses. Starting in 2016, mid-size employers (up to 100 employees) will be required to transition into the small-group marketplace, currently made up of smaller companies of up to 50 employees. Why is this significant? Because expanding the definition of the small-group market will drive up premium costs for the majority of mid-size businesses and lead to potential coverage disruptions for millions of employees and their families. In fact, nearly two-thirds of mid-size businesses face average premium increases of 18 percent or more as a result of the move, according to a recent analysis highlighted in AHIP’s latest issue brief.

But there is a way to protect the 3.4 million employees and their families enrolled in health insurance through mid-size firms from significant cost increases. Bipartisan legislation introduced in the House and Senate would allow states to maintain their current definition for small-group markets and provide stability for millions across the country. AHIP strongly supports this common-sense solution, as do many others, including the U.S. Chamber of Commerce, the National Association of Insurance Commissioners and The Center on Health Insurance Reform, all of which agree that this is an important step to protect the coverage that employees depend on.

During a hearing in the House Energy & Commerce Health Subcommittee, Chairman Joe Pitts (R-PA), Vice Chairman Brett Guthrie (R-KY) and Montana Insurance Commissioner Monica Lindeen, speaking on behalf of the National Association of Insurance Commissioners, urged the legislative initiatives to move forward:

“Unless this current law is reversed, the disruption in the marketplace will be significant,” Pitts said. “For example, it is estimated that under current law, more than 3 million employees will experience a double-digit percent increase in their health care premiums. Ultimately, cost increases for small employers will change their choices regarding offering coverage, could change their business model, and will ultimately be felt by millions of workers.”

“On January 1, 2016, the definition of the small group market is set to change and with that millions of employers will see dramatic changes to their insurance coverage,” Guthrie said. “Employers with 51-100 employees will suddenly be thrust into a new insurance category with dramatically different mandates and benefit requirements, and would not be able to continue to offer their current plans. Not only would these hard-working employees no longer be able to keep their current coverage, but the new plans they would be offered are likely to be significantly more expensive.”

“If this legislation is not signed into law, a series of market disruptions could occur,” Lindeen said. She added, “Mid-sized employers may face significant premium increases, and additional benefit requirements; it could increase cost-sharing.  A permanent fix is needed.”