ICHRA & benefits design
Fifteen people in a risk pool. One NICU stay. Everyone's rates went up.
Why the individual market can be cheaper than group for small employers.
Fifteen people in a risk pool. One premature baby. Everyone’s rates went up.
It sounds backwards — shouldn’t a company have more bargaining power than one person? But for small employers, the math works differently than you’d expect.
A circle labelled “your company” holds fifteen evenly spaced dots, one for each employee. They are the entire pool the plan is priced against.
Your company
One risk pool · 15 people
15 people. That is the whole pool.
A small group plan is a tiny risk pool.
Fifteen employees. One of them has a baby three months early. The NICU stay costs $800,000. That cost gets spread across 15 people. Watch what happens to the pool.
The same circle of fifteen dots, now outlined in red and flagged “+40%”. One dot has swollen to twice the size of the others: the employee whose NICU stay cost $800,000.
Your company
One premature baby · $800,000 NICU stay
$800K NICU claim. Your renewal just spiked 40%.
The ACA individual market is a massive pool.
Millions of people across your state. That same $800,000 NICU stay gets absorbed without a ripple. Rates are community-rated — based on age and region, not your company’s claims history.
Two pools side by side. The small group pool holds fifteen dots and one red claim, enough to move its rates 40 percent. The individual market pool is packed with hundreds of dots standing in for millions of people, and the same red claim is a speck inside it.
Small group
15 people
One claim = 40% spike
Individual market
Millions of people
Same claim = barely a ripple
For small employers, the math often favors the individual market.
The ACA’s risk pool is bigger, more stable, and doesn’t punish your company for one employee’s health event. This is especially true for groups under 50 — larger employers may still find group rates competitive.
A table comparing the small group pool with the individual market pool on three measures: how many people share the risk, what one $800,000 NICU stay does to the rate, and what the rate is actually priced on.
| Measure | Small group plan | Individual market |
|---|---|---|
| People sharing the risk | 15 | Millions |
| One $800,000 NICU stay | Renewal +40% | Barely a ripple |
| Rates priced on | Your company’s claims history | Age and region |
Truest under 50 employees. Larger groups may still find group rates competitive.