Does Small Group Health Insurance Deliver Group Benefits? An Argument in Favor of Allowing the Small Group Market to Die
October 01, 2018 | 93 Wash. L. Rev. 1121
John Aloysius Cogan Jr.
Abstract: The small group health insurance market is failing. Today, fewer than one-third
of small firms now offer health insurance and the number of people covered by small group
insurance continues to drop. These problems invite the obvious question: What should be
done about the small group market? Past scholarship on the small group market has largely
focused on documenting the market’s problems, evaluating the effectiveness of prior reform
efforts, and proposing regulatory changes to stabilize the market. This Article takes a
different approach to the small group problem by asking a previously unasked question: Does
the small group market deliver group insurance benefits? Group insurance, first established
in the life insurance industry, came about because it offered insureds a better deal than
individual coverage. Group insurance provided four core benefits: reduced adverse selection,
lower administrative costs, greater access to insurance, and tax-subsidized premiums. This
Article argues the small group market largely fails to deliver the core benefits of group
coverage. For many, the small group market offers no better deal than the individual market.
Given these findings, it is hard to justify further interventions to save the small group market.
The decline and dissolution of the small group market would likely shift millions to the
individual market, resulting in a substantially larger and more stable individual market.
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