3 Forces Molding the Small-Group Health Market Now

A field report

(Image: Thinkstock) (Image: Thinkstock)

Employee benefit plan open enrollment is here, and a number of factors are affecting the outlook of the small group market.

Continued uncertainty around the Affordable Care Act is driving small employers toward group plans, and away from the idea of depending on the individual market, but changing federal regulations and rising costs are affecting the group market, too.

(Related: Trump Praises Deal to Trade Temporary ACA Cash for State Flexibility)

Here are three trends to keep an eye on in the small group market.

1. Oscar Health is making a play.

In July, health insurance startup Oscar Health announced a partnership with Humana to offer small group health insurance in the Nashville, Tennessee, area. This regional market entry is in the small group market, for employers with 50 or fewer employees.

But the company also launched a broader strategy, Oscar for Business, earlier this year. This segment is for organizations with up to 100 employees, and the company’s consumer-oriented model could work well for millennials, who are quickly rising up the ranks in small businesses nationwide.

Despite significant financial losses on the individual side of its business, Oscar Health has continued to operate in growth mode, and its concierge services and technology-heavy service model could shake up insurance dynamics in Nashville and, eventually, elsewhere.

2. SHOP is dying. if not already dead.

The end of the idea of the Small Business Health Options Program (SHOP) selling coverage through the Affordable Care Act public exchange system seems all but certain. BlueCross BlueShield of Illinois announced it August it would leave the network, the last in a slew of problems for the program.

The Trump administration announced in the spring plans to end the HealthCare.gov SHOP program. According to the federal Centers for Medicare and Medicaid Services (CMS), the agency that runs the program, only 39,000 people are covered through SHOP. That’s well below the 4 million people the Affordable Care Act exchange builders originally hoped to be covering through SHOP plans by 2017.

CMS now proposes maintaining the Affordable Care Act Small Business Health Care Tax Credit, but allowing employers to enroll directly with insurance companies offering SHOP plans or through a broker registered with SHOP.

This is supposed to reduce burden on insurers, taxpayers and employers, but it isn’t clear whether this change, expected to take place in 2018, will actually improve access to health insurance for small employers.

3. Self-insurance is still on the rise.

Self-insuring is becoming a more attractive option for smaller employers. The Employee Benefits Research Institute recently reported that, although mid-sized employers showed the largest increase in use of self-insurance in 2015, small employers saw a notable 7% increase.

The train was already moving in this direction, but it is accelerating as complying with the stringent requirements associated with the Affordable Care Act essential health benefits requirements for fully insured small-group plans becomes prohibitively expensive for small employers.

The National Business Group on Health reports health care costs will rise 5% for employers in 2018, well above the rate of inflation.

Rising costs will remain the major challenge for small employers. Through this year’s open enrollment and into next year, we will see whether new carriers and a changing marketplace will improve, or weaken, the outlook for small employers.

—-Read Agents Angry About Unpaid ACA Exchange Plan Commissions on ThinkAdvisor.


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