Credit: Touchpoint Markets
Eliminating the U.S. small-group health insurance market could be good for the workers, according to a team of four economists led by Sebastián Fleitas.
Fleitas and his colleagues argue in a new working paper that having the workers spend their cash and the employers' cash on individual coverage, instead of on premiums for fully insured small-group coverage, would save the workers' households an average of $842 per year.
Related: The decline of the small-group health insurance market: Can policymakers save it?
Much of the savings would come from the fact that workers would see more plan choices and could pick coverage that fits their own households' needs, the economists write.
People who are sicker or who have lower income would tend to prefer to stick with small-group health insurance, and healthier, higher-income people might tend to prefer buying their own individual coverage, the economists suggest.
What it means: Researchers are looking seriously at the idea that U.S. workers might be better off if their employers handed them cash and sent them to buy their own coverage.
The paper: A working paper is a research paper that has not yet been put through the full academic peer review process.
A copy of the Fleitas working paper is available, behind a paywall, on the website of the National Bureau of Economic Research.
Research details: The Fleitas team based its analysis on data from a "United States insurance company" that's active in the small-group market.
They looked at coverage for groups with two to 50 insured lives.
The economists did not give the company's name, but they said that the company provided data for small-group coverage that was in force from 2013 through 2015 in Arkansas, Delaware, Illinois, Missouri, Oklahoma, Pennsylvania, Tennessee, Texas, Wisconsin and Wyoming.
The economists were interested in using statistical methods to analyze how different design choices might affect which employees would prefer individual coverage and which employees would prefer small-group coverage.
The economists looked only at factors such as the premiums for the coverage and the estimated out-of-pocket costs, not at factors such as provider network adequacy, enrollees' satisfaction with their coverage or indicators of care quality, such as the percentage of breast cancer cases identified at a stage at which the cancer might be easy to treat.
The researchers found that the average annual premium at the plans in their data was $3,373 for small-group plans and $4,596 for the equivalent individual policies. Average deductibles were lower for the individual policies.
The small-group problem: Large and midsize employer plan enrollment has been holding steady in recent years, but the number of people with fully insured small-group coverage fell to 11.5 million 2021, down 39% from the 2011 total, according to a paper published on the JAMA Network Open site in April 2023 by a team led by Elizabeth Plummer.
Some researchers have proposed responding to the problems in the commercial small-group market by encouraging employers to use individual coverage health reimbursement arrangements or similar mechanisms to provide cash that workers can use to buy individual major medical coverage through the Affordable Care Act public exchange system.
Republican members of Congress have introduced bills that would address the problem by encouraging small employers to use association health plans or small self-insured plans.
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