Speculation about employers dropping group coverage in 2014 has sparked debate about what pressures will drive evolution of the health insurance market. Most American workers expect funding and access to a health plan through employment. The notion of employers dropping group coverage without simultaneously providing funding and access to individual coverage is naïve. Labor demands won’t allow it. That’s not to say that certain employers won’t drop group coverage, but those that do will certainly be pressured to take the money formerly spent on group health insurance and give it to employees in some form. However, employers are unlikely to drop group coverage unless all employees have fair and equal access to individual coverage.
Availability of coverage is not enough – price matters. So how will individual product prices compare with small group or large group plans? Massachusetts commissioned a 2006 study of their marketplace in which they compared individual product prices to small group product prices at a time where both markets were guaranteed issue (GI), but before the Commonwealth merged the two markets. The study revealed that GI individual products were priced about 15% higher than small group products, comparing apples to apples. Some states are certain to keep the individual market pooled separately from small group, and as a result, individual products will be more costly than comparable group plans in those states. For large employers, their self-insured rates will likely trump both individual and small group rates.
For the foreseeable future, large groups will hold together as group health plans mainly based on cost, and many small group markets will offer enough pricing incentive to act as glue for small group health plans. That’s not to say private exchanges won’t make head way, but that many private exchanges that target employer groups will offer group health plans (e.g. Utah Health Exchange, HealthPass New York, Aon Hewitt, etc.) rather than individual health plans.
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