Individual Enrollment Tops Small-Biz Health Coverage in California

The number of Californians with health coverage through small employers dropped below enrollment in the individual market for the first time, a new study shows.

Coverage in the small-business market declined 11 percent in 2014 — to 2.1 million — while coverage in the individual market surged 47 percent to 2.18 million, according to a report released Thursday by the California Healthcare Foundation.

The numbers are important because this is the first complete picture of how enrollment changed in California in the first year of mandated coverage under Obamacare. Gains in the individual market were fueled by the new insurance marketplace at Covered California that offers premium assistance to people with low incomes. How many business owners decided to dump benefits and send workers to the state health benefit exchange remains unclear.

The new data stem from legislation enacted in 2012 that requires the California Department of Insurance and California Department of Managed Health Care to publicly report year-end enrollment figures for all the health plans and insurers they regulate. There’s no comparable historical data, but this appears to be the first time enrollment in the individual market has overtaken small employer group coverage.

“We were all waiting to see: did the individual market really grow?” said Katherine Wilson, an independent health care consultant who crunched the data for the healthcare foundation and wrote the report. ”In fact, it did grow — and it grew a lot.”

The 47 percent increase represents nearly 700,000 additional enrollees. About half of those with individual coverage bought it through Covered California, where nine out of 10 received tax subsidies to help offset premium costs. The other half bought coverage directly from insurers without premium assistance, according to the report.

Group coverage — small and large employers combined — remains the main channel for buying health insurance. About 11.8 million Californians had group coverage at the end of 2014, down more than 580,000 people, or 5 percent. The notable drop was among small employers, typically defined as those with less than 50 employees. Those numbers are down by more than 257,000 people, a decline of 11 percent.

“The small group market is really last in line,” Wilson said. “But the jury is still out,” she added. “Is this a one-time adjustment or sign of a trend?”

The small employer market has a long history of vulnerability; it’s the place where employers struggle to offer insurance — and the numbers have declined over a period of years, Wilson explained. There was a significant drop in 2014, but the economy is picking up, and insurance is a good way to attract and hold onto employees.

Brokers are not surprised by the numbers, but a little alarmed.

“A lot of people, even though they are offered insurance through their employer, are going to the exchange for subsidies, sometimes for themselves, sometimes for their dependents” said Brad Davis, a Woodland broker who is on the board of the Sacramento Association of Health Underwriters. That’s a problem, he added, because of the so-called “family glitch” that forbids consumers who turn down affordable insurance at work to get subsidies for themselves or dependents through Covered California. Those who do go ahead — and get subsidies — may face a “claw-back” of the money by the IRS.

That said, there are low-wage employers who do better dropping coverage and allowing workers to buy on the exchange, Davis added.

The Affordable Care Act solved a problem for people who are not offered coverage by their employer: affordable coverage without underwriting for pre-existing conditions, added Cerrina Jensen, another local broker who is president of SAHU.

“But in terms of premiums, access to providers and benefits, I think employer-sponsored coverage is still a better option,” Jensen said. Her own book of business has grown. That’s due, in part, to the fact that some small employers qualify for tax credits if they offer insurance through Covered California.

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