Health insurance experts debated Wednesday during a congressional hearing whether a planned change to the definition of a small business under the Affordable Care Act would be more disruptive than altering the law to allow states to set the definition for themselves.
Currently under the ACA, on Jan 1., businesses with 51 to 100 employees would join the small group marketplace of businesses with 50 or fewer employees.
The bipartisan Protecting Affordable Coverage for Employers Act, introduced in the House earlier this year, would allow states to continue to define small businesses as employers with one to 50 employees for health insurance purposes.
Supporters of the bill say expanding the small group market and therefore putting more restrictions on plans offered by mid-size businesses would result in higher premiums and less flexibility in benefits.
Also, those mid-sized businesses may, in the face of increased costs, decide to self-insure. This would leave the smallest employers in the market with less healthy pools and force them to increase premiums.
"Ultimately, cost increases for small employers will change their choices regarding offering coverage, could change their business model, and will ultimately be felt by millions of workers," said Rep. Joseph Pitts (R-Pa.), chairman of the House Committee on Energy and Commerce Subcommittee on Health.
Monica Lindeen, president of the National Association of Insurance Commissioners, said her organization supports the bill and would like to see it passed as soon as possible. Insurers are setting 2016 rates now and businesses need to make coverage decisions by the end of September.
State markets have different characteristics and dynamics, so the effects of the bill would be different in each state, she said.
"That's why it's really important we have the ability to make this decision at the state level," she said.
Kurt Giesa, partner at Oliver Wyman Actuarial Consulting, said mid-sized businesses will have two main choices if the ACA is not changed. They will either join the new market or start to self-insure.
"Those that choose the small group market will be the oldest and the sickest and that will drive up premiums," he said.
An analysis by his firm predicts that if the small group market is expanded as planned, about 64% of mid-sized businesses would see a premium increase averaging about 18%.
Mike Kreidler, Washington state insurance commissioner and the longest-serving insurance commissioner in the country, said he does not support the bill because he thinks the scheduled ACA change would stabilize the small group market.
He says employers and insurers have been planning for the definition change and that the move would actually lower premiums, at least in Washington.
"It would significantly harm the market that is just starting to improve," Kreidler added.
He said the Washington Legislature would almost certainly not allow the state to expand its small group market despite his recommendation. He suggested postponing the federal requirement for two or three years instead of scrapping it entirely.