Sizing the Potential for Healthy Groups
With the merging of the 51-100 employee employers into the small group market (groups with up to 50 employees), the small group market potentially increases by over 40%. Yet, such market growth only occurs if all employers with more than 50 employees choose fully insured products over self-insurance.
Our Founder contributed to the American Academy of Actuaries recent issue brief, Potential Implications of the Small Group Definition Expanding to Employers with 51-100 Employees, which states: “Groups sized 51-100 that will be subject to the small group market rules may have increased incentives to self-insure” and “groups … with a younger and healthier population, may have the greatest incentives to self-insure” increasing the risk that “the small group, single risk pool plans would experience adverse selection” with [p]remiums for these plans [to] increase”.
The Urban Institute fears such adverse selection and has sought to limit the expansion of self-insurance. It states that applying significant limitations to the growing stop loss market would allow “the fully insured small-group insurance market [to] be about 1.5 times as large, and premiums in that market [to] be 20-25 percent lower”.
The Institute’s analysis suggests a significant financial opportunity for the employer willing to self-fund its health plan. Based upon the Institute’s estimates employers choosing to self-insure were expected to see a 20-30% price benefit versus the small group fully insured product.