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

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

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

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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.


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

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