Question: You obviously believe that the ACA puts the group health insurance market in California at risk. Yet, most of the press coming out of the health insurance industry says that most employers will continue to provide group health insurance. Who’s right?
Answer: There’s room for disagreement on the published surveys to which you refer. Most are biased toward maintaining the status-quo, partly because that’s what the entities conducting the surveys want to hear, but mostly because the respondents have no idea how to answer the question. They don’t yet understand how the ACA will affect them and their employees. Here are some other reasons:
- Under the ACA, small-business employers (less than 50 employees) are not required to provide employer-sponsored health insurance and there is no penalty for not doing so. The California small group market accounts for about 3 million lives today. About 1.2 million individuals currently in the small-group market qualify for premium subsidies which are only available in the individual Exchange.
- Small-business employers are struggling with what to do with health care costs. The solution available today is an “average” solution that maybe meets the needs of half of their employees. They don’t have a solution that is tailored to the individual. The individual Exchange is going to have something that is tailored to what the person is trying to buy.
- The incumbent small-group carriers - Anthem, Kaiser, and Blue Shield - who control two-thirds of the market, are not highly motivated to defend this market. They probably expect to maintain their market-share in a migration to individual plans in the Exchange. While their more profitable market - larger employers with more that 50 employees - account for 12 million lives.
- Another possibility is that there is a disruption in this market, that is a different group of health plans captures this emerging individual market because they master the kinds of skills and build the kind of model that allows them to capture this new growth opportunity.