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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