Assignment 10 - Small Group Market

Question 1

The likelihood of a small firm offering health coverage to its workforce seems to be correlated with ______

Answer 1

firm size.

Question 2

The ACA exempts firms with fewer than _____ full-time workers from the requirement that firms either provide health insurance coverage to their workers or pay a penalty.

Answer 2

50

Question 3

The Kaiser Family Foundation found in a study that it conducted that 43% of small employers indicated that ______ was the major reason why they only offered a single plan

Answer 3

substantial administrative cost

Question 4

A study conducted in a recent year found that only ____ of small employers—those with fewer than 200 workers—offered a flexible spending account (FSA) option for their workers.

In contrast, ___ of firms with 200 or more workers did so, according to a comparable study.

Answer 4

17%

76%

Question 5

Firms that do not establish FSAs can nonetheless shelter employee insurance premium contributions from federal and state income and payroll taxes by establishing ______

Answer 5

premium-only plans.

Question 6

What reasons do small employers provide as a rationale for their absence in providing health coverage to their employees? (4)

Answer 6

1. many employers reported that they cannot afford to provide coverage either now or in the future.
2. employees did not value the coverage sufficiently.
3. administrative costs of providing that coverage.
4. fourth reason for not providing coverage related to insurance coverage for owners themselves.

Question 7

Small employers that do provide health insurance coverage offered four general reasons for doing so.

Answer 7

1. firm would lose employees to competitors if it did not offer what the employees want.
2. group coverage provides a source of personal insurance coverage for the owner who has no other coverage.
3. Small employers also indicated that offering coverage enhances productivity.
4. the most common reason given for offering coverage was that “it’s the right thing to do.”

Question 8

The bulk of small employers purchase health insurance through_______

Answer 8

an agent or broker.

Question 9

Commissions for groups of fewer than 25 enrollees buying health insurance tend to be in the ___ range. Commissions for larger groups are about half as large, while the commissions may be in the ____ range in the individual market.

Answer 9

• 8% to 10%
• 16% to 20%

Question 10

The subject of a relatively recent survey concerned the topic of how agents and brokers spent their time when servicing clients in the small group health plan market. The brokers and agents who were surveyed indicated that they spend most or “a lot” of their time:

Answer 10

explaining coverage and investigating options for clients.

Question 11

involves the practice whereby brokers and agents help to identify high- and low-risk applications for insurance. Adverse selection is a significant concern of insurers.

Answer 11

“Field underwriting”

Question 12

What are the concerns that brokers and agents have concerning the adoption and implementation of the Affordable Care Act (ACA)? (3)

Answer 12

1. agent and broker commissions are considered administrative costs in the computation of the medical loss ratio (MLR).
   
   • ​As a consequence, there is likely to be downward pressure on commissions and a withdrawal of some agents and brokers from the market.
2. the creation of the small employer and individual exchanges raises considerable uncertainty about the demand for agent and broker services
3. the exchanges are also required to provide “navigators.”
   
   • The obvious concern is the distinction between navigators and agents and brokers and the potentially diminished role that agents and brokers will play in helping to select coverage.

Question 13

Does small-firm employee census impact premium price sensitivity when deciding to offer group health insurance?

Answer 13

Yes

Question 14

Several policy initiatives have been implemented at the state government level in an attempt to positively impact the small group health insurance market. Because employees in small firms are less likely to be offered health insurance through their employer, states have implemented a number of policy initiatives to affect this market. These can be considered in three broad categories:

Answer 14

• (1) bare-bones coverage laws
• (2) premium limitations
• (3) underwriting provisions.

Question 15

mean that if a small firm wishes to buy coverage at an insurer’s established rates, the insurer cannot refuse to sell the coverage

Answer 15

Guaranteed issue laws

Question 16

In studying state health care policy initiatives regarding small group health plans, researchers often distinguish between ___ and ____

Answer 16

“full reform” and “partial reforms.”

Question 17

generally is defined as requiring guaranteed issue and renewal, portability, limitations on preexisting conditions clauses and the use of rating restrictions.

Answer 17

“Full reform”

Question 18

appear to reduce the probability of coverage for the smallest of small businesses.

Answer 18

Partial reforms

Question 19

Is there a clear consensus by researchers on the effectiveness of state health care reform initiatives on promoting expansion of group medical coverage in the small group market?

Answer 19

Yes - no effect

Question 20

rationale for creating small group coalitions and association health plans.

Answer 20

banding together for lower premiums

Question 21

a coalition is likely to be successful only if it is able to combine small groups with similar______

Answer 21

claims experience.

Question 22

How are association health plans regulated?

Answer 22

• the association must be licensed by the state to sell insurance
• must have sufficient reserves and must abide by other statutes

Question 23

Various rationales are suggested for creating association health plans. The rationale is twofold:

Answer 23

1. First, AHPs would be exempt from state insurance mandates that require coverage for specific services, providers and categories of subscribers.
2. Second, AHPs may be able to better pool similar risk groups and take advantage of the cost savings of larger groups.

Question 24

What has research shown about the small group health insurance market? (3)

Answer 24

• small firms are less likely to offer health insuracne than larger firms
• smallest of the small have a larger insruance price sensitivity
• efforts to subsidize coverage, and to change the underwriting and other features small group market, have not had much impact on the decision of these firms to offer coverage.

Question 25

On those firms that meet the requirements to offer health insurance to their employees, there are penalties for failing to offer this coverage. Small firms with 50 or more full-time workers are required to offer coverage or pay a penalty of ______ per employee (excluding the first 30 workers).

Answer 25

$2,000

Question 26

• Tax credits are available for small firms with fewer than__ full-time-equivalent employees.
• The firm must pay average annual wages of less than $____ and must pay half or more of the premium for qualifying coverage.
• A firm may take the credit for only ___ years.

Answer 26

• 25
• $50,000
• two

Question 27

there are certain “grandfathering” provisions under the ACA. Employers with a health plan that was operational before _____ (i.e., the date the law was passed) are allowed to keep their existing plan.

Answer 27

March 23, 2010

Question 28

How are small firms with fewer than 50 employees that offer health insurance likely to reconfigure their plan offerings?

• (3 scenarios)

Answer 28

• One way will be to drop health insruance and raise their workers’ wages
• The ACA prohibits the use of medical underwriting in determining insurance rates, combining risk pools and increasing premiums
• small employers with healthier workforces could shift to self- insured status to avoid the increase in premiums resulting from the ACA-induced change in underwriting rules - creating the classic adverse selection problem