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Does Limiting Allowable Rating Variation in the Small Group Health Insurance Market Affect Employer Self-Insurance?
1Assistant Research Professor, University of Southern California Price School of Public Policy, Schaeffer Center for Health Policy and Economics, Verna and Peter Dauterive Hall 412G, 635 Downey Way | Los Angeles, CA 90089, 213-821-6178.
Abstract:
The Affordable Care Act (ACA) imposes adjusted community rating in the small group market, which employers can avoid by self-insuring, raising concerns about adverse selection. We evaluate the impact of limiting allowable rating variation on employer self-insurance across industries with varied health risk, using cross-state variation in pre-ACA rating regulations, the nationally-representative 2008-2013 KFF/HRET Employer Health Benefits survey, and a triple-difference regression approach. We find that lower-risk employers subject to laws limiting allowable premium rating variation have a predicted probability of self-insurance that is about 18 percentage points higher than otherwise-similar higher-risk employers, suggesting that these selection concerns are warranted.
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