June 12, 2013
Obamacare’s new insurance marketplaces for small businesses, which have already stumbled before getting out of the gate, are facing another pressing question just months before millions can sign up for benefits: What happens if insurers don’t show up to sell?
Early looks at insurance offerings on the Obamacare exchanges show that insurers aren’t exactly signing up in droves to sell on the new Small Business Health Option Program exchanges, known as SHOP. In some states, just one insurer has signed up for the SHOP exchanges, which are supposed to foster competition and make it easier for small businesses to purchase coverage. The SHOP exchanges exist alongside the exchanges for individuals, which have gotten more attention in preparation for the health law’s rollout.
The Obama administration is still trying to recruit insurers to states where there’s been little interest in exchanges. But some health law advocates believe administration health officials have put a greater emphasis on standing up the individual exchanges, where they hope premium tax credits will be a big draw for millions to sign up for coverage next year.
In many cases, they also see little incentive for SHOP exchanges in 2014. A limited tax credit for small businesses only available in the SHOP exchanges has so far received less interest than expected, and a key feature providing employees with more freedom to pick their health plan has been delayed in most states.
“I think the SHOP exchanges are basically a 2015 issue, but we will see how they work out in the states that are doing them, and they might turn out to be a bigger factor going forward,” said Tim Jost, a Washington and Lee University law professor and supporter of the health law.
That’s the hope in Washington state. Just one insurer will sell exchange plans to small businesses in 2014, even as nine signed up for the state’s individual exchange. So the Washington exchange is scaling back the SHOP rollout, making the program available only in some counties in the first year.
Exchange officials in the state insist that they were ready for a full SHOP launch in the first year, but they said insurers, facing limited time to prepare for these new markets, focused on scooping up customers in the individual market, which the exchange had projected would account for 98 percent of enrollment in 2014.
“While we were disappointed overall this first year, it was just tough for [insurers] from a timing standpoint to get everything geared up and ready to roll for Oct. 1,” said Michael Marchand, director of communications for the exchange. Already, several insurers have indicated their interest in joining the SHOP exchange for 2015, he said.
Just one insurer has also signed up to sell coverage in North Carolina’s federal-run small business exchange in 2014, prompting concern from advocates in the state.
“It’s concerning from a public perception standpoint as businesses were told this would increase competition and lower costs,” said Adam Linker, a health policy analyst at the North Carolina Justice Center. “It’s also concerning because it seems like the SHOP is an afterthought.”
And in Mississippi, no insurers have signed up for the federal-run SHOP exchange, Insurance Commissioner Mike Chaney recently told POLITICO. Only one insurer has applied to sell on the state’s individual exchange.
The SHOP program caused headaches for the Obama administration earlier in the year, when opponents seized on its decision to delay a program allowing employees greater flexibility to pick their own exchange health plans instead of having their employer choose. The “employee choice” program won’t be available in the 35 federal-run exchanges in 2015, though some states are determined to move forward in 2014.
Employee choice was seen was an attractive feature of the new insurance markets, but HHS couldn’t get it done in time. The administration says the small business exchanges will provide value in 2014 even without that feature.
“The SHOP will still provide employers with a streamlined comparison of health plans from multiple health-insurance issuers, assistance modeling employee contributions and real-time premium quotes,” HHS wrote recently. “These benefits would not be available to employers under simplified implementation.” HHS also noted that any plans on SHOP must be certified as meeting minimum standards, a potential plus for small businesses and their workers.
A more complete picture of SHOP participation across the country likely won’t come together for another few months, before the start of exchange enrollment on Oct. 1. Some exchanges have seen much more insurer interest, though. Six insurers have applied for Virginia’s SHOP while 11 signed up in Michigan.
“Michigan has a large number of HMOs domiciled in the state, and large amount of health insurance companies in general,” Caleb Buhs, a spokesman for the Michigan insurance department, offered as a reason for the healthy SHOP participation.
The SHOP situation is still unclear in California, which won praise from the White House and health law supporters when the exchange announced rates for the 13 insurers in the individual market in May.
Micah Weinberg of the Bay Area Council, a California business group that supports the health law, expects the state’s SHOP program will have fewer choices, but he doesn’t think that’s necessarily a bad thing.
“What’s interesting is that employee choice may actually work better, at least in the initial period, with fewer choices,” Weinberg said. “This will mirror the outside market better than a market with many choices.”