Only a few employers will take advantage of rules allowing some small businesses to avoid pending health reform measures, rendering the rules relatively obsolete and minimizing their impact on health insurance costs, according to new analysis and simulations conducted by health policy researchers.
But that could change if the rules are rewritten to extend the opt-out offer to more companies, according to the study by RAND Corporation, a nonprofit policy research group. By letting more employers keep their old plans, experts say the government would drive up premiums offered to small employers through health insurance exchanges and consequently slash enrollment in those programs.
“We found that keeping the rules as they are written, particularly the limitations on maintaining a grandfathered plan, will be essential to keeping premiums affordable in small business insurance exchanges,” Christine Eibner, the study’s lead author and RAND senior economist, said in a statement.
Beginning in 2014, under the Affordable Care Act, laws governing health insurance plans for small business owners will no longer allow insurers to set premiums based on enrollees’ gender, health status or claims history. The goal is to disperse the financial risk of insuring unusually sick or high-cost individuals, but some fear the plan will be undermined by small employers with healthy workers who instead self-insure their firms or maintain grandfathered policies — options offered under the Affordable Care Act that would allow them to bypass the new regulations.
Should that trend play out, the government-sponsored exchanges would become disproportionately comprised of relatively unhealthy, expensive enrollees, which could make the premiums for small employers simply unaffordable.
However, according to the RAND analysis, most small employers will steer clear of self-insuring due to the significant financial risk involved. Additionally, researchers said most small employers will not meet the standards required to grandfather existing health plans after 2014.
Neither opt-out alternative, they say, should have a substantial impact on exchange premiums — that is, so long as the language in the Affordable Care Act doesn’t change. On the other hand, if regulations were further relaxed to let more companies keep their current plans, RAND estimates that the cost of premiums offered to small business owners through health insurance exchanges would climb significantly, possibly cutting enrollment in those plans by as much as 50 percent.