The Small Business Health Insurance Exchanges: Opportunities and Challenges
The state health insurance exchanges are the centerpiece of the Affordable Care Act’s insurance expansions, providing new affordable health plan options for individuals and small employers. States will establish exchanges for both individuals and small businesses by January 2013; if a state is unable to do so, the Department of Health and Human Services (HHS) will play an active role in setting them up. The small business exchanges, also known as the Small Business Health Options Program (SHOP), will enable small companies of up to 100 employees to offer a selection of affordable health plans to their employees. Beginning in 2017, states can open up the exchanges to companies with 100 or more employees.
States across the country are grappling with how best to design their exchanges. A recent set of Commonwealth Fund–supported articles in last month’s issue of the journal Health Affairs examined how the SHOP exchanges might make it easier for small employers to offer affordable health plans. On February 22, The Commonwealth Fund held a webinar, “The Small Business Health Insurance Exchanges: Opportunities and Challenges,” cosponsored by The Small Business Majority and the National Business Coalition on Health. Moderated by The Commonwealth Fund’s Sara Collins, the webinar, which drew an audience of 430 people, featured four of the authors:
- Timothy Stoltzfus Jost, J.D., the Robert L. Willett Family Professor of Law at the Washington and Lee University School of Law, who reviewed the SHOP exchanges’ potential to increase the accessibility and affordability of health insurance for small business. He also explained how HHS’s proposed regulations give states flexibility with regard to coverage options and aim to ease their administrative burdens.
- Jon Kingsdale, Ph.D., managing director and cofounder of the Boston office of Wakely Consulting and founding executive director of the Massachusetts Commonwealth Health Insurance Connector Authority, discussed how SHOP exchanges might expand choices and lower premium and administrative costs for small businesses.
- Terry Gardiner, vice president for policy and strategy at the Small Business Majority, explained the role of insurance brokers and the need for a single entry point through which small businesses can access everything they need for insurance application, payments, and enrollment changes.
- William Kramer, M.B.A., executive director for national health policy at the Pacific Business Group on Health, provided a large employer perspective, suggesting that the exchanges could be purchasing allies for large employers, and that large employers are already considering using the exchanges for pre-Medicare retirees and part-time workers.
Following the presentations, Sara Collins invited questions from the audience. Below are some highlights.
Q: The New York Times “You’re the Boss” column featured a small business owner, Ann Gish, who expressed frustration with the administrative complexities of offering insurance to her employees, saying that what she wants from reform is simplification. While she has occasionally read press accounts of how the Affordable Care Act will change insurance, she still does not know what to expect. But 2014 is right around the corner and by the fall of 2013 Ms. Gish will be able to choose plans for her employees through the exchanges. How would the panel respond to Ms. Gish’s uncertainty about 2014?
- Terry Gardiner: We’ve found that the majority of small business owners haven’t heard of exchanges, how they would work, and what they could do for small businesses. Once they learn more about them they become very intrigued. In Ms. Gish’s case, where she had one employee that really needed a different plan from the group plan she selected, I think the exchange is tailor made. As a small business owner, you may be able to pick a plan that works for 70 percent of employees but maybe you’ve got 30 percent who need a different plan, network, or level of coverage. The employers will be able to accommodate this through the exchanges. Fitting the needs of all of your employees will be a real bonus.
Q: Should businesses using the exchange expect it to be an active purchaser or open market place? An active purchaser is empowered to selectively contract with carriers, set higher standards for participation than the federal standards, and also may negotiate prices.
- William Kramer: It obviously will vary state to state, depending on the nature of the existing individual and small group markets, but having a set of performance measures for the “qualified health plans,” or QHPs, that will be sold through the exchanges and their affiliated providers—and encouraging and rewarding QHPs that are, for example, moving away from fee-for-services to better provider payment arrangements that reward quality and efficiency—are the kinds of things that an “active purchaser” would do. Large employers do it now, and they would assume and hope that the exchanges would do it as well because it simply makes sense.
Q: How will the federal government approach the development of SHOP, versus the individual exchanges, in states that have chosen not to set up their own exchanges?
- Tim Jost: The guidance that HHS has put out thus far is that they have a strong preference, as does the statute, for state operation and ownership of the exchange. Yet it’s becoming increasingly clear that a fair number of states are not going to be up and running in the fall of 2013. When the federal government has to step in to run the exchanges, I think it will be quite happy to hand off the exchange once the states get to the point where they can take over, and it will also try to work closely with the states in the operation of the exchanges. So I don’t think we’re going to see federal- or state-exclusive exchanges going forward, but rather there will be a continuum. It will be clear who is ultimately in charge, but most states will be partnerships.
- Jon Kingsdale: I think that the challenge for a federally facilitated exchange in any state when dealing with small employers, as opposed to individuals, is that there really is a high degree of customization required to service those employers, and to even reach them, to communicate about group health insurance and other employee benefit options. I don’t want to say that the federal exchange will not do as well with SHOP as with non-group, but I think they’re going to have to find a way to customize to the more regionalized and local service requirements, marketing components, and communications channels, required for the SHOP exchange.
See the StateRefor(u)m blog to read some of the questions the panel didn't have time to answer and make your own comments.