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FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 27, 2015 12:30 PM (EST)
Overall growth for insurers in the commercial market segment is being driven by enrollment gains in individual products, primarily due to the implementation of the health insurance marketplaces, according to a new Best's Briefing. The briefing is titled, "Commercial Segment Remains Important to Revenue Expansion; Margins Under Pressure."
This overall growth has partially offset membership losses in the employer-based group business segment. In addition, large and small employer-based group businesses remain challenged by continuing declines in fully insured enrollment. As health premiums increased for group coverage, employers have historically increased employee cost-sharing to offset rising costs, which has included:
Although some large employer groups have moved to a self-funded arrangement in order to contain cost, this trend has recently moved down the market to the small to midsize employers. In the small-group segment, A.M. Best has observed an increase in companies discontinuing offering coverage entirely. Additionally, some groups—those with lower-wage employees who may be eligible for premium subsidies under the Patient Protection and Affordable Care Act—have dropped coverage because it is less expensive for the employee to purchase coverage through the exchanges.
The commercial group business segment remains an important market sector for insurers, even with its decline, as employer-sponsored health benefits are the predominant coverage for individuals. Beginning in 2015, the employer mandate also will impact the marketplace. Businesses with 100 or more employees will be required to offer coverage to at least 70% of its full-time workers—the mandate defines full-time employment as 30 or more hours per week. In 2016, the mandate states that employers with 50 or more employees are required to offer coverage for up to 95% of their full-time employees. Employers who decline to provide coverage entirely, or who are non-compliant with this requirement, are subject to financial penalties ranging from $2,000 to $3,000 per employee, excluding the first 30 employees. Penalties also can be applied if offered plan designs do not meet certain requirements, such as covering 60% of medical expenses. A.M. Best believes the penalties are not likely to cause a large uptick in coverage rates for groups because the penalties are far lower than the premiums, which could actually create the opposite effect of more employers dropping coverage. An employer may also reduce the number of employees or reduce an employee's hours in order to avoid the coverage requirements, but the ultimate impact remains to be seen.
For the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=234073 .
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