Obamacare’s Small Business health exchanges have fallen short of expectations on enrollment, functionality and cost – leading many to wonder if they’ll be able to survive in the years ahead.
The Small Business Health Options, or SHOP exchanges, are a key provision of Obamacare intended to give small firms more options and potentially cheaper insurance policies. But just last week, the Government Accountability Office warned that enrollment totaled just 76,000 in the 18 states that set up their own exchanges.
That’s far below the Congressional Budget Office’s previous estimate of two million enrollees by 2015 in both the state and federal exchanges. And though auditors did not have access to enrollment data for the federal exchange that covers 33 states, officials from the Centers for Medicare and Medicaid Services told GAO they expect those numbers to be low as well.
The GAO detailed SHOP’s problems that have contributed to the very limited participation in the program.
For example, the federal SHOP exchanges’ online enrollment was delayed for a year – and just opened this Saturday. Some state exchanges were also forced to delay their online enrollment tools as well.
Another reason small companies may have decided not to participate is because the tax credit that was meant as an incentive to sign up “may be too small and administratively complex to motivate many employers,” GAO said. The auditors also said that because employers were allowed to renew previously existing plans, many opted to do so instead of use SHOP exchanges. Lastly, GAO said premiums for policies sold on the SHOP exchanges weren’t a better deal, on average, than non-SHOP plans.
Small business advocates have been sounding the alarm for months. They said firms were avoiding SHOP because it wasn’t worth the hassle. GOP lawmakers, seizing on the GAO report, also criticized these exchanges for not drumming up enough interest among small firms.
“The administration touted SHOP as a way for small companies and their employees to benefit from more health insurance competition and choice, and ultimately lower prices,” said House Small Business Committee chairman Sam Graves in a statement. “Instead … costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees and the majority of small business owners paid more per employee for health insurance in 2013 than in 2012.”
Some experts, however, say it’s far too early to start writing the program’s death sentence.
Linda Blumberg, an economist at the nonpartisan Urban Institute, said it’s not surprising SHOP’s enrollment numbers were low in 2014. The administration and other health officials were focused on outreach for the individual state and federal health exchanges.
“It’s up to states and the federal government to educate small businesses about SHOP right now,” Blumberg said. “Some companies aren’t even aware of the program or how it works.”
The Obama administration has said for months it would be making changes to the SHOP exchanges to increase the appeal to small businesses—chief among them getting online enrollment up and running on the federal exchange. They’ve also unveiled a mobile app for employers to browse health plans and brokers using GPS technology.
Still, if policies sold on the exchanges aren’t cheaper than off-exchange plans, employers would have little reason to switch.
This year, SHOP exchanges did not include employee choice plans.
“Instead, small employers were able to pick from one of many qualified health plan choices for their employees, mirroring what will already be available to employers in the traditional small group marketplace,” according to the National Association of Health Underwriters. With few advantages over the traditional market – many employers weren’t persuaded to switch.
Under the law, companies with 50 or fewer employees are eligible for small business tax credits. However, some tax preparers say the credits aren’t enough to encourage companies to offer health insurance. Some even say the complex rules of the credits and the time needed to calculate them has deterred claims, the Journal of Accountancy noted.
Though experts say it’s unlikely the SHOP exchanges will be scrapped any time soon, Blumberg notes that if that did happen, it would have little impact on the law itself: People would likely just use the private exchange or non-exchange plans. She noted, though, that small businesses would no longer have access to the enrollment tools that SHOP offers – nor would the small business tax credits likely be available either, unless the administration changed that policy.
Why This Matters
If Obamacare's SHOP exchanges fail, small businesses won't have access to the small business tax credits offered under the law unless the administration takes action. If states end up killing their programs, the federal government will be on the hook for the administrative costs associated with setting up the exchanges. Overall, experts say there would be little financial impact on the industry or the federal budget.
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