Question

Several reforms have been implemented to address issues in the small-group insurance market. Describe two main issues in this market.

Answer 1

Two reforms and problems of the small group insurance market because of these reforms :

1. Under the Affordable Care Act (ACA), the definition of small group insurance industries has been expanded from 'those with less than 50 eomployees' to 'those with less that 100 employees' (since 2016). However, restrictive rating rules on the 50-99 employees bracket may increase the premium in the insurance market for certain groups. Another problem faced by the the 50-99 employees bracket is that they will be exposed to the shared-responsibility penalties under the new rules which again could lead to increased premiums due to higher liability.

2. Merging the individual and small group markets. This reform would genereally imply a lower premium for the individuals and a higher one for the small group industry. This will lead to decrease in net benefit for the small group industries and it is speculated that certain firms might opt out of insurance at high premiums and compel their workers to opt for personal insurance.