Small Firm Self-Insurance Under the ACA: Minimum Stop Loss Attachment Points and Adverse Selection in the Fully Insured Small Group Market

Journal Article

Small Firm Self-Insurance Under the ACA: Minimum Stop Loss Attachment Points and Adverse Selection in the Fully Insured Small Group Market

Abstract

The Affordable Care Act changes the small group insurance market substantially, but most of these changes do not apply to self-insured group plans. This exemption provides an opening for small employers with healthier workers to avoid broader sharing of health care risk, isolating higher-cost groups in the fully insured market. We simulate employer decisions under the ACA for a range of stop loss insurance plans, which mediate financial risk, and find that if low-risk stop loss policies are allowed, fully insured small group premiums could be higher by up to 25%. Regulation of stop loss could prevent such adverse selection.

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Centers

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