The success of the Small Business Health Options Program (SHOP) in creating viable health insurance exchanges for the small-group market hinges on persuading small employers and health plans to participate. In this Commonwealth Fund–supported article, Jon Kingsdale argues that the reason many small firms do not currently offer health insurance to employees is not lack of availability—as there is a thriving commercial market for small-group coverage—but because of cost. To succeed, the SHOP exchanges must make a compelling business case to small employers.
What the Study Found
One way the state SHOP exchanges can differentiate themselves is by giving small employers a broader range of health plan choices, something employers typically do not have. States may also be able to create operational efficiencies by merging the individual and small-business exchanges or by waiving fees typically charged by intermediaries, like business associations. In addition, states may able to use the market power of the SHOP exchanges to attract and promote lower-cost, higher-value health plans that are not typically available to employees of small firms. This last strategy has proven effective in the Massachusetts Commonwealth Choice program, where the low-overhead Network Health Plan accounts for nearly 40 percent of total enrollment. Offering such options may help to reduce costs and enhance the business case for SHOP exchanges.
SHOP exchanges can attract small employers by offering their employees choices among a differentiated set of health plans—including high-value, low-cost plans that may reduce overall expenditures.