New Jersey has successfully “flattened the curve” in the growth of coronavirus cases, but the prospect of a second wave can’t be ignored, and cautious consumers may not return to dining out or shopping locally anytime soon.
Small employers are at the cross-currents of pandemic-driven forces. Many small businesses rely on face-to-face interactions, and few have deep pockets to weather shutdowns and stalled demand. The revenue freefall that businesses have experienced over the last five months makes sustaining payments for health insurance coverage challenging if not impossible. Yet, at a time when we are all vulnerable to a dangerous virus with no vaccine and limited treatment options, the idea of going without health coverage can be terrifying.
To address growing challenges in small group health insurance, the Rutgers Center for State Health Policy convened a virtual expert panel on July 16. Drawing on perspectives from the insurance industry, small business, and public affairs, the forum shed light on the causes of our troubled market and possible solutions. The discussion was informed by analysis and policy recommendations provided in the New Jersey Health Care Quality Institute’s recently released white paper on options for the small group market. You can view the entire forum here. What follows is our take on the upshot of this discussion.
The forces that keep premiums high
The small group health insurance market has inherent challenges. Coverage for small businesses has high administrative costs and the small group market is vulnerable to adverse risk selection. Groups with older and sicker workers have much greater demand for coverage than those with young and healthy workforces. These forces contribute to keeping small group premiums high. High premiums, in turn, encourage firms with lower-risk workers to drop out of the market, leading to an unvirtuous cycle of declining enrollment and rising premiums. Without policy measures to stabilize the market, it has a propensity toward “adverse selection death spirals,” insurance jargon that is self-explanatory.
To understand the current state of New Jersey small group health insurance, and to think about policies to rescue our market, we need to provide a bit of history. The chart below shows trends in the number of people covered in New Jersey’s individual (sometimes also called non-group) and small-group markets. The trends are clear. The two lines crossed in the first quarter of 2020, for the first time, with more people covered individually than in small groups. At its peak, in 2005, nearly 1 million people were covered by small group health insurance in the Garden State. Today enrollment is less than a third of that level.
In the period before 2014, New Jersey’s small group insurance market was declining by about 10,000 covered lives per quarter, largely because of fast-rising premiums compounded by lingering effects of the 2007-2009…
Read More: Opinion: We Must Rescue Health Insurance for Small Businesses and Their Workers