Document Type



Health Law and Policy | Insurance Law | Law and Economics


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.