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The cost of health insurance has been the primary concern of small business owners for several decades. State small group health insurance reforms, implemented in the 1990s, aimed to control the variability of health insurance premiums and to improve access to health insurance. These small group reforms only affected firms within a specific size range, and the definition of the upper size threshold for small firms varied by state and over time. The primary intended result of these reforms was to increase the propensity of small firms to offer health insurance. However, because of the way these regulations were crafted, an unintended consequence of the reforms may have been to affect the size of small firms around the legislative threshold. Several studies have examined the effect of health insurance mandates on the propensity of small firms to offer health insurance. These studies generally find little to no effect of the mandates. In this paper, the authors examine the effect of small group reforms on small business size and find some evidence that firms that were near the threshold adjusted their size.

The research described in this report was conducted by the Kauffman-RAND Center for the Study of Small Business and Regulation which is housed within the RAND Institute for Civil Justice.

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