Whether health care reform will result in a move from group coverage to individual health insurance plans is a critical question. For brokers, carriers and employers wanting to prepare for the future, the answer will determine where and how they spend their time, money and resources to negotiate a changing world.
By a wide margin, readers of this blog who responded to an unscientific survey expressed the belief that health care reform is far more likely to result in consumers moving from small group to individual medical coverage than the other way around (70% versus 13% with 17% stating reform would have no effect on whether people obtain individual or group health insurance). They majority may be right. but a new study indicates it’s too soon to bet too much of the farm on this prediction.
Using sophisticated modeling techniques, researchers at the RAND Corporation are predicting that the Patient Protection and Affordable Care Act will “result in a large net increase in employer-sponsored insurance offers.” The findings, published in the New England Journal of Medicine, are based on modeling using “RAND’s Comprehensive Assessment of Reform Efforts (COMPARE) microsimulation model.” Which is a fancy way of saying the researchers used a nifty tool that predicts the future by making informed assumptions on the probable impact of things like the establishment of exchanges, individual subsidies, employer penalties for failing to offer coverage, expansion of Medicaid, availability of spouse’s coverage, existing incentives for employers to offer coverage and other factors in a really sophisticated way. (The folks at Medpage Today offer a useful description of the RAND study predictions).
The researchers (Christine Eibner, Ph.D., Peter S. Hussey, Ph.D., and Federico Girosi, Ph.D.) project the number of Americans obtaining coverage through their employers will increase from 115.1 million to nearly 129 million. Significantly, they predict that “the probability of being offered coverage increases proportionately more for workers at small firms than for large firms” – a surprising result given that small firms are not subject to the PPACA’s penalties imposed on employers failing to offer health insurance to their workers. Of the 13.6 million additional workers who they project will be offered coverage as a result of the new health care reform law, 10.4 are expected to be employed by small businesses (less than 100 employees).
Driving this influx of small business employees into the group market are are “increased demand for coverage by workers due to individual penalties for being uninsured and the availability of new, often lower-cost insurance options.” These lower cost plans are expected to be offered through the exchange and result from administrative savings these new arrangements are expected to provide.
Assuming exchanges will be able to provide coverage at a lower price point than equivalent plans sold in the open market is a big assumption. Based on the experience of purchasing pools in California and other states during the 1990s, this may be an unrealistic expectation. But the outcome of the model used by the RAND researchers is still worth considering.
The truth is we won’t know whether consumers move from group to individual coverage or migrate in the other direction until the reforms are more fully implemented and consumers, employers, lawmakers, carriers and others make meaningful decisions. Predictions are nice, but it’s reality that pays the bills.
In the meantime, however, all we can do is guess. And the RAND Corporation study offers projections that, while they should not be taken as a certainty, are certainly educated guesses.