How Payers, Policymakers Can Help Small Business Health Coverage

With New Jersey’s small group health insurance market in decline, the New Jersey Health Care Quality Institute (Quality Institute), a nonpartisan group that advocates for collaboration among healthcare stakeholders, has issued several strategies to help payers, states, and employers improve small business health coverage.

“Many small employers are interested in identifying an affordable way to provide health care coverage for their employees as part of their benefit package, as this can enhance the attractiveness of an employment offer and increase employee retention,” the Quality Institute stated.

“However, rising costs in this market and decreased enrollment have made the SGM less attractive to carriers, employers, and employees.”

Small group employers have 50 employees or less. These companies often face barriers to providing healthcare coverage. Despite the challenges, healthcare coverage is a priority for small businesses. Almost 90 percent of small business employers (88 percent) said that employee health and wellbeing was one of their primary concerns in a recent survey.

In the 14 years between 2005 to 2019, New Jersey’s small group market dropped from 981,000 enrollees to 309,000, with an average loss of over 7,800 members per quarter in the last year.

Rising premiums, growing enrollment in self-funded, alternative, or individual health insurance market plans, and regulatory developments instigated this shift away from the New Jersey small group health insurance market.

“The small group market is at a critical point, as small employers are paying more for less — higher premiums for lower value plans,” said John J. Sarno, president of the Employers Association of New Jersey.

In response, the Quality Institute proposed a couple of short- and long-term solutions for the current situation that were particularly relevant for payers.

First, the organization suggested making data related to small business employee healthcare coverage more accessible.

This data is probably already being collected by the state from employers and payers, the Quality Institute recognized. However, it is not broadly available and, if it was, it could result in savings for small businesses.

Second, New Jersey has a rule that health plans have to sell plans on both the small group health insurance market and the individual market. However, some payers price their plans exorbitantly in one market to focus on the other.

The Quality Institute suggested that eliminating this rule would allow for more competition on the state’s small group market. It could have a negative impact on the individual health insurance market, driving prices up and competition down. But the impact for the small group health insurance market would be positive.

Third, the Quality Institute found that out-of-pocket healthcare spending caps limit employees’ options because payers refuse to offer these plans. The organization suggested that payers have more flexibility in benefit design for certain metallic tiers, such as the bronze level, to help stabilize the market.

In addition to these payer-related suggestions, the Quality Institute continued with six other solutions.

Fourth, the state could offer a tax credit to small employers who offer ACA-compliant plans in order to incentivize small businesses to provide healthcare coverage.

Fifth, the Quality Institute found the state’s rating policies outdated and suggested an update.

Sixth, policymakers could allow the small group health insurance market to use drug formularies. The Quality Institute estimated that this would produce savings of $10 to $12 per member per month, shaving off two percent of small group market premiums.

Seventh, self-funded and level-funded plans should be restricted or phased out as the state reinforces the small group health insurance market. This would cut down on churn between self-funded and standard plans and would control premiums and give enrollees more plan options.

Eighth, for individuals who switch to the individual health insurance market, the state should increase subsidies. This would help temper turbulent premium costs, the organization suggested.

Ninth, the Quality Institute suggested a “Bast Evidence Plan,” not just for the small group health insurance market but also for the individual and other markets.

“A ‘Best Evidence’ (BE) Plan would recalibrate the current payment system to support more primary, preventative, palliative, and mental health care and would disincentivize low value care,” the recommendation stated.

The Quality Institute emphasized that this new plan would build on the ACA’s essential health benefits but prioritize primary and preventive care as well as evidence-based care and technology utilization.

Some payers began attending more closely to the small group health insurance market as it struggled through the pandemic. Cigna and Oscar created an entirely new brand aimed at creating affordable plans with integrated telehealth solutions for small businesses.

Priority Health decided to offer a 15 percent premium credit to its small group health insurance members. The payer offered it out of the surplus of premium revenue that would not be put toward claims, since nonurgent care has been delayed.

“We need policy changes to make insurance more affordable so more people are offered insurance and can afford it,” said Linda Schwimmer, president and chief executive officer of the Quality Institute. “More people buying within an insurance market — including those who are healthy as well as those who are less healthy — creates a more stable and sustainable insurance market.”