Christy Abend, product leader for active employment at Equifax Workforce Solutions, has been watching small-group health plan enrollment trends with keen interest. Her business unit helps small employers comply with federal Affordable Care Act and state health insurance regulations, and she pays close attention to the regulatory nuts and bolts.

Drafters of the Employee Retirement Income Security Act of 1974 went out of their way to hold down employer health plan sponsors' costs by having the federal government preempt state efforts to regulate health benefit plans.

But Congress left regulation of the business of insurance to the states, and the Affordable Care Act of 2010 reinforced that decision, by letting states add their own local tweaks to provisions such as the ACA essential health benefits package rules, which requires non-grandfathered individual major medical policies and non-grandfathered fully insured small-group plans to cover a state's version of the EHB package.

Supporters of state autonomy contend that state legislators and regulators are in the best position to set rules that reflect the nature of local hospital systems, barriers to wellness, population demographics and residents' values.

Abend makes the case that one of the causes of the decline of the fully insured small-group market is the lack of regulatory uniformity in that market.

She answered questions about her views via email. The interview has been edited.

BENEFITSPRO: The idea of health plans offering standardized benefits sounds like it should help small employers understand their plans and do a better job of shopping for plans. How do state efforts to create "enhanced essential health benefits packages," or EHB packages tailored to fit local needs, affect small employers?

CHRISTY ABEND: Some states mandate additional services beyond the ACA's 10 EHB categories, including acupuncture, chiropractic care, or infertility treatments.

While these additions can improve access to care, they also increase costs for insurers, and ultimately, for employers.

Are there other types of state rules that push employers out of the fully insured small-group market?

Another state effort that may cause problems for these employers is state-specific mandates.

Certain states have imposed mandates for specific conditions or services, and while these mandates can be beneficial for those utilizing related services, they may also drive up premiums and make it harder for small businesses to offer affordable coverage.

A third state effort that may cause problems for these employers is state-specific taxes and assessments. To fund state-run health insurance exchanges or other programs, some states impose taxes or assessments on health insurance premiums.

How do you see states' local rules affecting small employers?

One of the most significant effects is the rise in health insurance premiums for small employers.

Looking forward to 2025, smaller employers already have reported that their health benefits cost per employee would rise by, on average, 9% if they took no action to lower costs.

This could strain their budgets, making it difficult to offer competitive benefits packages to attract and retain employees.

Complying with varying state-specific mandates can also create a logistical nightmare for multi-state employers, which need to manage different plan designs and administrative processes for employees in different states.

What do you mean when you say "logistical nightmare"?

When states have their own individual health care mandates, they require employers to submit reporting on covered individuals each year. This can be an administrative challenge as the definitions of who needs to be reported, file formats, and submission processes vary state by state.

How do the state-to-state reporting variations affect small employers?

Small employers that allow remote employment or who recruit employees from bordering states need to stay on top of these requirements.

As compliance costs rise — and it remains difficult to keep up with multi-state requirements — some insurers may withdraw from certain markets, which reduces the number of plan options available to small employers and their employees.

Additionally, in some extreme cases, the financial burden of these regulations may force some small businesses to reduce their workforce, putting an additional burden on the employees who remain, or even close down if they are unable to remain competitive.

What do you think small employers should do about state-to-state variations in health insurance requirements?

There are a few steps that small employers can take to help decrease the impacts of state efforts to build on and extend ACA standards.

One option for employers is to offer individual coverage health reimbursement arrangements, or ICHRAs.

Offering coverage through an ICHRA plan gives small businesses the opportunity to contribute to an employee's individual healthcare plan and take advantage of the tax savings that traditional insurance plans provide, without having to manage the insurance carrier, renewals, rate increases and financial risk.

For some employers, offering self-funded plans, or self-insured plans, may offer more flexibility and control over plan design and costs. But that may also come with greater financial risk.

Small businesses can also work to advocate for change by working with policymakers and industry groups to push for reforms that address the challenges faced by small businesses in providing affordable health coverage.

It's also important for small employers to ensure they are aware of the various tax credit programs available to small businesses, such as tax credits for offering a small business health options program plan or SHOP plan.

What, if anything, should other players do about this?

Other players can help support small businesses as they navigate state efforts to build on and extend ACA standards.

State governments can consider the impact of these regulations on small businesses and seek ways to help mitigate costs and administrative burdens for small employers.

Insurers can develop innovative plan options that better meet the needs of small businesses and their employees, while helping keep costs in check.

Insurance brokers, consultants, and vendors can provide expert advice and support to small employers as they navigate the complex world of health insurance.

When small employers use a third party to help them manage benefit administration or ACA reporting requirements, they should ensure that they use a trusted source that has deep connections with federal and state-level government agencies, which can help ensure they stay up to date with requirements, help employers remain compliant, and take advantage of cost-saving benefits strategies.

Related: Expanded association health plans could cover 600,000 in 2025: Congressional Budget Office