While the special federal health exchange serving small businesses is expected to go online this fall, and more states will offer a variety of insurance plans to employees, don’t expect enrollment to take off.
The Small Business Health Options Program (SHOP) -- which is meant to help as many as 13 million people employed by small businesses win a break on health care costs -- has launched, but it has launched with a limp. Its 2013 debut was limited to states that ran their own online exchanges and now another partial delay offered by the Obama administration combined with market dynamics will restrain the number of sign-ups in the near term.
The program was originally intended to run alongside the federal and state-based insurance exchanges for individuals. Only employees of firms with 50 or fewer workers could select plans from a number of carriers competing for their business. That competition and simplified administration -- “aggregating payments” across participating insurers -- is supposed to drive down premiums in a market that’s costly because it’s smaller and carries more risk.
Small employers are already less likely to insure their employees, and the SHOP exchange was designed to fix that. When they do offer insurance, it’s usually a single plan negotiated by a broker at higher cost because that’s the nature of the small-group market. Allowing these businesses to pay a lump sum for employees who can shop online for a variety of plans is supposed to relieve the high cost of administering these plans and, with greater participation, drive down costs. But without that participation the small-group market won’t be viable and insurers won’t participate.
In November, at the height of the Affordable Care Act’s technical troubles, the Obama administration announced it was delaying online enrollment in the small business exchange the federal government is operating in 32 states until November of this year. Then in May the Department of Health and Human Services gave those states a chance to apply for another year-long delay and granted a reprieve for all 18 states that applied. Insurance commissioners argued in letters to the department that the number of people in the small group market opting for coverage through the Affordable Care Act is so small that allowing employees to choose from a variety of plans will lead to rate spikes because risk will be too uneven.
A variety of factors has depressed enrollment in the first year, which helps ensure that enrollment will remain lackluster in the near future. For one, the Obama administration has allowed small employers to renew their existing plans through 2016 even if they don’t meet ACA coverage standards, and many did exactly that because of uncertainty with the exchanges. On top of that, a tax credit for businesses with fewer than 25 employees has a limited reach and has been difficult to navigate.
Once those renewals run out and every state is offering employee choice in an online exchange, it's likely enrollment will steadily improve. But without the employee choice feature, there’s little reason for a small business to go through the exchange instead of the brokers they’ve traditionally used.
“We’re not really expecting anything radically different next year,” said David Chase, the California director of the Small Business Majority, a trade group that supports the ACA. “Small business owners are still kind of uncertain about the law, and if their broker said you can keep your old plan for a year or two, a lot of them will say, ‘I’ll just stick with what I’ve got.’”
That sentiment shows in the enrollment figures so far. HHS has claimed it doesn’t have numbers yet because its pen-and-paper system depends on that information from insurers “under a new process” that’s yet to be finalized. But without a web-based system this year, those numbers will be low anyway. The data coming out of state-based exchanges haven’t inspired confidence, either. In California, a state with nearly 700,000 small businesses, about 1,200 employers signed up through March 31, covering 4,900 people. In Colorado, 220 businesses covering 1,860 people were signed up as of April 23. In Connecticut, 78 businesses sought plans through April 8, covering 330 people.
Anemic enrollment is leading some of the more capable exchanges, such as Connecticut’s, to promise strong outreach to small businesses to boost enrollment, but even Connecticut’s exchange director, Kevin Counihan, acknowledged to a local paper he isn’t expecting “huge growth” next year. With close to 20 states in the federal exchange delaying the employee choice option for another year, don’t expect vibrant growth nationally, either.
“HHS is dead serious about rolling out the SHOP exchange for 2015,” said Tim Jost, an expert in health care law at Washington and Lee University. “But allowing about 20 states to opt out, it’s not going to be for 2015 what it could have been.”