By Sabrina Corlette, Erik Wengle*, Megan Houston, and Tyler Thomas*

Small business owners have long struggled to provide their workers with health insurance. Relative to large businesses, they face high and often volatile premiums, a lack of market power for negotiating with insurers, and high administrative costs. With tens of millions of people employed by small businesses in the United States, federal and state policymakers have pursued strategies to help small employers purchase and maintain affordable health coverage. These strategies, including insurance market reforms, small business tax credits, Small Business Health Options Program (SHOP) marketplaces under the Affordable Care Act (ACA), and the easing of regulatory standards and facilitation of health reimbursement arrangements, have resulted in a market buffeted by dramatic change.

In a new report, researchers at Georgetown University’s Center on Health Insurance Reforms and the Urban Institute assessed market trends and interviewed health insurers, brokers, and members of the small business community in six states to gain insight into how the COVID-19 pandemic and recent federal policy changes have impacted how the small group market is working for consumers. Key findings include:

• The pandemic did not cause widespread disruption in coverage rates, employer contributions to premiums, or benefits in the small group market.
• There were few coverage issues identified associated with COVID-19 testing, treatment, and vaccinations, while enhanced telehealth coverage was welcomed by employers.
• Rising premiums in the fully insured market have led many small employers to explore non-ACA compliant coverage types including self-funding with a stop loss policy, group captives, professional employer associations and association health plans. The availability of these types of coverage options varies greatly by state, and is leading to concerns about adverse selection in the small group market.
• Many small employers remain reluctant to shift their employees to the individual market because of concerns related to narrow networks, age-rated premiums, and high-cost sharing. The appeal of the individual marketplace has not yet significantly changed by enhanced subsidies from the American Rescue Plan because of their temporary status.
• With a few exceptions, Individual Health Reimbursement Arrangements (ICHRAs) have not attracted many small employers because of a lack of broker financial incentives, lack of awareness, and the complexity associated with setting one up.

Read the full report here.

The report was made possible thanks to the generous support of the Robert Wood Johnson Foundation.

*Erik Wengle and Tyler Thomas work for the Urban Institute.