Predicting response to regulatory change in the small group health insurance market: the case of association health plans and HealthMarts.

Lack of health insurance continues to be a concern for many people, even among those who are employed, and employees of small firms are much less likely to be insured than employees of larger firms. For several years, the U.S. Congress has considered legislation that would establish two new vehicles for offering health insurance coverage to small employers: association health plans (AHPs) and HealthMarts. In this paper, we present a model for estimating the impact the new entities would have on coverage and premiums in the small group health insurance market. The model produces a range of estimates based on assumptions, among others, about demand for insurance among small firms and their willingness to switch to less expensive, less generous benefit plans. We estimate that approximately 4.6 million people would obtain coverage through AHPs and HealthMarts, but fewer than half a million of them would be newly insured (based on 1999 population figures). Premiums would increase slightly for firms that continued to purchase coverage in the traditional market.