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Delay on Choice in Small Business Exchanges Arouses Bipartisan Worry on the Hill

By Jane Norman, CQ HealthBeat Associate Editor

April 4, 2013 -- Members of Congress from both parties are signaling their unhappiness with a proposal by the Department of Health and Human Services (HHS) to put off for a year a requirement that workers at small businesses in the exchanges be offered a smorgasbord of competing health plans.

But as the Centers for Medicare and Medicaid Services (CMS) works to ramp up a huge infrastructure for exchange enrollment beginning Oct. 1, CMS officials' comments in the proposed rule indicate they feel there's only so much they and insurers can manage in the first year of exchange operation in 2014.

Administration officials said they wanted to ensure market stability, and also said they feared that insurers might shortchange their preparations for other insurance plans for the individual and small-business exchanges if they had to produce multiple small-business plans.

That approach was applauded by WellPoint, the parent company for many Blue Cross and Blue Shield plans across the country. The delay will "provide HHS, states and issuers with the time and flexibility necessary to adapt to new operational and technical requirements," said Anthony Mader, vice president for public policy, in formal comments Wellpoint submitted.

Under the proposal unveiled in March, CMS officials said they would like to delay an "employee choice" model for small businesses in the states with federal exchanges, and also give states with their own exchanges the chance to postpone.

Small companies now often offer just one plan to keep costs manageable, but under the health care law (PL 111-148, PL 111-152) in 2014 there were to be multiple plans available for workers in the Small Business Health Options Program, or SHOP. That program was intended to create a one-stop shopping experience for small businesses and their employees and make it easier to find coverage, lawmakers said.

But in its March proposal, CMS said it would not enforce that requirement until Jan. 1, 2015, for SHOPs in the states with federal exchanges. In the state-run exchanges, states could choose to require multiple plans or stick with just one plan.

Rep. Ron Kind, D-Wis., whose state will have a federal exchange, said he was disappointed with the delay. "Small businesses and workers need health care options so they can decide which plan is best for their needs and their budgets, and delaying those choices will mean higher costs for coverage," Kind said in a statement.

Republican Rep. Sam Graves of Missouri, chairman of the House Small Business Committee, sent a letter to CMS protesting the postponement of the choice option. On Fox News last week, Graves said the point of the small-business exchanges was to reduce costs for small business by offering competitive plans.

The delay is indicative of a "mess" as implementation of the law moves forward, said Graves. "And, you know, we're trying to figure out what the administration's delay is about, why they are delaying," he said.

On the Senate side, the Democratic chairwoman of that chamber's Committee on Small Business and Entrepreneurship expressed her displeasure as well. "Delaying the implementation of these requirements, as specified under the law as Congress intended, will serve to prolong and exacerbate health care costs that are currently crippling America's nearly 29 million small businesses," wrote Mary L. Landrieu of Louisiana.

The proposed delays, she said, leave unclear what advantage the SHOP exchange will hold compared to insurance that can be obtained outside the exchange. And if too few companies participate in the SHOP marketplace, that could be a problem, she said.

CMS officials said in the proposal that they are trying to make the shift to a new system smoother by not putting too much of a burden right away on insurers or on the new small-business marketplace.

Officials said they heard concerns that insurers couldn't meet the deadlines for submitting qualified health plans for the small-business program, or might be unable to complete the enrollment and accounting system changes that would be needed to accommodate multiple plans. Insurers also warned that all the work needed on SHOP could hinder their preparations for plans in the individual exchange, officials said.

They stressed that they did not make the decision in a vacuum. "HHS has consulted with a wide range of interested stakeholders on policy matters related to the SHOP, including through regular conversations with the National Association of Insurance Commissioners, health insurance issuers, trade groups, consumer advocates, employers, agents and brokers, and other interested parties," CMS officials said in the proposal. "HHS has also held many consultations with states about the SHOP, both individually and through group conversations."

But even groups usually allied with CMS are taking issue. Families USA said in its formal comments on the proposed rule that the organization is "very concerned" about the delay. Fewer employers will enter the SHOP exchange because they won't see an incentive, said the letter from Claire McAndrew, senior health policy analyst. And contrary to CMS' opinion that the market could be destabilized by implementing choice too soon, "we believe that the consequences of this delay would create a very unstable foundation for the SHOP exchange," said McAndrew.

Kaiser Permanente, representing its allied health plans, hospitals and doctors, agreed. The delay is "very unfortunate" and threatens the viability of the SHOP exchange, said Anthony Barrueta, senior vice president for government relations.

"Absent employee choice, the SHOP exchange offers no distinct advantage over the existing inefficient marketplaces," he wrote. "As small businesses and employees are introduced to the new marketplace to purchase insurance, a fundamental consumer benefit of the SHOP exchange will not be available."

The deadline for public comment passed last week. A final rule on the proposal has not yet arrived for review at the Office of Management and Budget, the last stop prior to publication.

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