She says most small employers will choose not to self-insure because of the financial risk of unknown employee medical expenses. Although the analysis demonstrates that the self-insure option would reduce enrollment in the small business insurance exchanges changes, it won't have a substantial impact on exchange premiums.
But Kuhlman counters that small businesses are often unable to predict many of the costs associated with the ACA. He says that stop-loss insurance and reinsurance can be priced into the future and that predictability may sway more small businesses to opt out of the ACA regulations.
And he points to an ACA tax provision on health insurers that kicks in in 2014 and is projected to raise $1 billion that year as another incentive for small businesses to turn to self insurance. "That cost will be passed on to fully insured small businesses in the form of higher premiums."
Eibner notes that under the status quo very few small businesses with fewer than 100 employees self-insure even though that option would allow them to avoid state rating regulations and state coverage mandates.
Some policy wonks argue that increased interest among small business could result in cost adjustments in stop-loss market that would make self insurance more affordable and attractive to small business. Eibner has looked into that scenario and says a high proportion of small businesses would be required to exercise that option to adversely affect premiums in health insurance exchanges. "We don't see that happening."