Bloomberg BNA: Rep. Graves: Management Failures of SHOP Marketplaces Part of 'Disturbing Trend'
December 11, 2013
By Sara Hansgard

(BNA) The management failures of the Small Business Health Options Program (SHOP) marketplaces established under the Affordable Care Act are part of a “disturbing trend” exhibited by the Obama administration in implementing the law, the chairman of the House Small Business Committee said at a hearing Dec. 11.

“Small firms are burdened already by the health-care law's requirements without the additional uncertainties in the SHOPs,” committee Chairman Sam Graves (R-Mo.) said at the hearing, titled The Small Business Health Options Program: Is It Working for Small Businesses?

The administration has delayed offering multiple plan choices for employees in the SHOP marketplace operated by the federal government, and on Nov. 27 the administration announced it will delay for a year operating an online SHOP federally facilitated marketplace until late 2015, Graves said (230 HCDR, 11/29/13).

Contrary to promises from President Barack Obama, the ACA has neither lowered the cost of health insurance for small businesses nor simplified the process of obtaining it, Graves said. Instead, small companies are reporting significant increases, and since enrollment began in the marketplaces Oct. 1, “millions of Americans and thousands of small businesses have received cancellation notifications from their insurers.”

He cited testimony given to the committee Dec. 4 by the owner of an accounting firm in Michigan who said her firm's plan is being canceled and the most similar plan she could find had premiums that were 40 percent to 44 percent higher than her current plan's (234 HCDR, 12/5/13).

Lack of Website Not a Hindrance

Rep. Nydia M. Velazquez (D-N.Y.), the committee's ranking member, said a survey found that 80 percent of firms that offer health insurance use a broker or agent, and firms with between 25 and 50 employees are more likely to use one. “The fact that we don't have the website doesn't mean that it will hinder the ability of small businesses to get into the health-care marketplace,” she said.

Velazquez cited Department of Health and Human Services findings that in 11 states, premiums were an average of 18 percent lower than the amount small firms paid before the law's enactment. The SHOP marketplaces give business owners more options and high quality health insurance, she said, but acknowledged that delays in the website and employee choice options for the federal SHOP have created “frustrations for all parties involved.”

Gary Cohen, director of HHS's Center for Consumer Information and Insurance Oversight (CCIIO), said that small business owners point to the employee choice model as a key feature that will be attractive for companies. “That does provide something that has not been available to most employees in the past,” he said. Under the option, which is available in many state-based marketplaces but won't be available in the federal SHOP marketplaces until 2015, companies may offer employees numerous health plan options.

Most of the state-based SHOP marketplaces are giving employers the option of allowing employees to choose from a number of plans, Cohen said.

Premium Increases From Benefit Changes

Cohen said benefit changes required by the ACA beginning in 2014 have contributed to premium increases for some businesses.

However, he said, the “essential health benefits” required in the small group market were based on the most prevalent benefits that existed in each state's market. “In small group, the benefits haven't changed that much,” he said. But changes made by the law, such as prohibiting insurers from charging small companies more if an employee gets sick, “will result in greater stability over time for rates. So I think that it's going to be somewhat misleading to look at just 2013 to 2014. I think you really need to look at the trend of what's going to happen going forward.”

Cohen said the average increase in premiums for small businesses in 2012 was 4.7 percent, and he cited a national survey of employer-sponsored health plans conducted by Mercer that found health benefit costs per employee rose 2.1 percent in 2013, compared with increases of 18 percent a year or more previously. He cited the ACA's premium rate review provision, as well as the law's requirement that health plans spend at least 80 percent of premiums on health care as helping to reduce rate increases.

Cohen said the HHS doesn't have enrollment figures for the federal SHOP marketplaces, but it will get enrollment data from insurance companies, which the HHS will report, but he didn't say when. He said he didn't know how many group policies have been canceled. Many policies in the individual market have been canceled because they don't meet ACA requirements.

Number of Plans in Federal SHOP Marketplaces

In the federally facilitated SHOP marketplaces, 66 “qualified health plans” offer 914 options, and 106 qualified dental plan issuers offer 511 plan options, he said. More than 70,000 agents and brokers have been trained to assist consumers in the federal marketplace, including many who have completed a course specific to the SHOP marketplace, and the HHS has been working closely with brokerage trade associations over the past several weeks since the online federal SHOP has been delayed, he said.

Rep. Tim Huelskamp (R-Kan.) said that Cohen testified four times in 2013 that the HealthCare.gov website, of which the SHOP marketplaces are a part, “would be up and running by Oct. 1.” He asked when Cohen knew about the problems with the website.

“When Oct. 1 came we ran into a number of difficulties and problems that were unanticipated,” Cohen said. “At the time I gave that testimony I was providing the best information that I had.”

Cohen said CCIIO is the “business owner of the marketplaces, including the SHOP.” It has provided regulations and guidance for operating the marketplaces. “The people who built the website don't report to me,” he said. The HHS had contracts to build the website that were supervised by people in the CMS Office of Information Services who report to the chief operating officer of the CMS and CMS Administrator Marilyn Tavenner, who reports to HHS Secretary Kathleen Sebelius. “They're outside of my organization,” Cohen said.

He said he “was involved in conversations as far as what the functionality of the website was going to be into September, and we were pushing very hard to get as much functionality to be available for Oct. 1.” He said it was “sometime into September when a decision was made that [the SHOP marketplace] just wasn't going to be ready for Oct. 1.” Operation of the federal SHOP marketplace was then delayed until late November, and later it was delayed for a year.

Tax Credits

Cohen said he couldn't estimate how delaying the federal SHOP would affect the availability of small business tax credits. “Recognizing that we were not able to provide the online experience, we've tried to do everything that we can to make sure that employers will have access to those tax credits,” he said.

Companies with the equivalent of fewer than 25 full-time employees earning less than an average of $50,000 a year are eligible to receive tax credits to help pay for employee health insurance for a limited time in the SHOP marketplaces, Cohen said. Since the tax credit became available in 2010, “it's provided hundreds of thousands of small businesses more than $1 billion in total tax credits,” he said.

Unlike individual tax credits, which can be claimed on an advance basis during the tax year, small businesses claim their tax credit on their tax return at end of the tax year, Cohen said. Unlike the individual market, which has an open enrollment period, businesses can sign up for coverage at any time during the year, he said.

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