November 05, 2014
The NYT had a piece discussing the extent to which small businesses are continuing to offer health care insurance to their workers through the exchanges created by the Affordable Care Act (ACA). Incredibly, the article never mentioned the prohibition on experience rating.
While many states had regulations that limited experience rating, prior to the ACA many small firms would see huge increases in premiums if one of their employees developed a serious illness. The ACA requires that insurers can only adjust rates in accordance with the age composition of the workforce, they cannot charge higher rates to a company because one or more of its employees has a serious illness. This will make insurance considerably more affordable for many businesses.
It would not be surprising if the ACA did cause fewer small businesses to offer insurance. The main purpose of the ACA was to create a well-working individual insurance market so that people who did not have insurance through an employer would be able to get affordable insurance through the exchanges. Insofar as the ACA succeeds, there is less reason for a small business to go through the effort of arranging its own insurance. This is not obviously a bad thing, since employers are not necessarily well-positioned to determine the best insurance for their workers.
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