How The Affordable Care Act Impacted Small Group Coverage Trends

From 2013 to 2020, small group coverage has maintained a fairly stable environment, researchers from the Urban Institute found.

The researchers used the Medical Expenditure Panel Survey Insurance Component (MEPS-IC) in order to assess changes in the small group health insurance market, in particular focusing on data from the years following the Affordable Care Act’s implementation.

“Small businesses have always been less likely to offer coverage than larger businesses,” the report stated. 

“In contrast to some predictions, the small-group insurance market stabilized in the wake of the ACA. The stability in employer offer rates may reflect reduced costs and volatility as a result of market reforms that eliminated underwriting, set minimum loss ratios, and established community-rated premiums and standard benefits packages, among other changes.”

The share of small businesses—which have less than 50 employees—that offered insurance hovered around approximately 50 percent from 2013 to 2020, the researchers found.

The report broke down these employers even further, dividing them into three subsections based on the number of employees and observing what share of employees had employer-sponsored health insurance.

Among the companies that boasted 25 to 99 employees, 81.2 percent of employees received health insurance through their employer in 2013, compared to 80.7 percent with employer-sponsored health insurance in 2020. On the opposite end of the spectrum, among employers with ten employees or fewer 36.2 percent of employees were covered by their employer and this dropped to 30.2 percent by 2020.

However, size was not the only differentiating factor. The researchers found that companies with higher populations of low-wage workers had a lower rate of coverage. In 2013, only 28 percent of small businesses with less than 50 employees more than half of whom were low-wage workers offered health insurance. This share dropped to 25.3 percent by 2020. 

Still, larger businesses that had half of their employee populations working in low-wage positions were much more likely to offer healthcare coverage. In 2013, 92.4 percent of these companies offered health insurance and by 2020 that statistic rose to 93.8 percent.

Coverage did decrease between 2013 and 2020, but the rate of increase was far less severe than the decade preceding the Affordable Care Act’s implementation. 

From 2013 to 2020, small business coverage dropped 2.6 percentage points with 8.9 million to 9.6 million enrollees between 2013 and 2019. In contrast, the marketplace experienced a 10.6 percentage point drop from 2002 to 2012.

Moreover, some small business trends mirrored health insurance trends in larger companies.

“In addition to deciding whether to offer coverage, firms must also determine who will be eligible for coverage,” the researchers noted. 

“The increase in the share of workers eligible for coverage across all firm sizes in 2020 may reflect survey response issues related to the pandemic. Large reductions in employment may have affected the share of workers who were eligible for coverage. Overall, eligibility remained similar across firm sizes.”

Among businesses that offered health insurance, 78.9 percent of employees were eligible in companies with 1,000 employees or more in 2013 and 81.1 percent were eligible in 2020, following a dive in the share of eligible individuals from 2013 to 2014.

Meanwhile, in companies with less than 50 employees, the share of employees eligible for coverage grew from 78 percent in 2013 to 80.2 percent in 2020.

Uptake trends also demonstrated similar patterns between small and large companies from 2013 to 2020—that is, fewer employees chose to leverage their employer-sponsored health plans over time. Medium and large firms experienced a sharp jump in uptake in 2014 but, after that, uptake trended downward.

As enrollment declined, the average cost of total premiums for individual coverage trended upward. Small, medium, and large firms all saw approximately the same slope from around $5,600 in 2013 to more than $7,000 in 2020. However, the researchers noted that medium and large companies experienced an even higher annual premium growth rate in the preceding decade.

The average total cost of premiums for family coverage also grew across all firm sizes over the course of the study timeframe. Small businesses had the lowest premiums all seven years. Large companies reached as high as $20,920 in average family premiums by 2020, while small businesses with fewer than 50 employees reached, on average, $19,416 that year.

The study found that small businesses were the least likely to use self-funded plans, although separate research suggested that, in certain states, small businesses gravitated toward self-funded plan options due to the coronavirus pandemic.

The researchers pointed out that these results can provide evidence for policymakers as they plan small group health insurance marketplace interventions. 

When it comes to picking a health insurance partner, small businesses have vocalized that they are particularly concerned about employee health and wellness, unique benefits, cost, telemedicine, and business recovery support.