Small Firms' Actions in Two Areas, and Exchange Premium and Enrollment Impact

Published In: Health Affairs, v. 31, no. 2, Feb. 2012, p. 324-331

Posted on RAND.org on February 01, 2011

by Christine Eibner, Carter C. Price, Raffaele Vardavas, Amado Cordova, Federico Girosi

Read More

Access further information on this document at Project HOPE: The People-to-People Health Foundation, Inc

This article was published outside of RAND. The full text of the article can be found at the link above.

Research Question

  1. How will rules allowing small businesses to opt out of health reform affect insurance costs?

The Affordable Care Act changed the regulations governing small firms' health insurance premiums. However, small businesses can avoid many of the new regulations by self-insuring or maintaining grandfathered plans. If small firms with healthy and lower-cost enrollees avoid the regulations, premiums for coverage sold through insurance exchanges could be unaffordable. In this analysis we used the RAND Comprehensive Assessment of Reform Efforts microsimulation model to predict the effects of self-insurance and grandfathering exemptions on coverage and premiums available through the exchanges. We estimate that Affordable Care Act regulations restricting employers' ability to offer grandfathered plans will result in lower premiums on plans available through the exchanges and will have small negative effects on enrollment in the exchanges. Our results suggest that these regulations are essential to keeping premiums on the Small Business Health Options Program (SHOP) exchanges affordable. Our analysis also found that Affordable Care Act regulations limiting self-insurance will reduce enrollment in the exchanges somewhat, without substantially affecting exchange premiums.

Key Finding

  • Two rules allowing small businesses to avoid participating in health reform will have only a minor impact because relatively few businesses are likely to take advantage of these options.

Recommendation

  • Keeping the rules as they are written will be essential to keeping premiums affordable in small business insurance exchanges.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.