Making a Place for Small Businesses in Exchanges

by David Gorn, California Healthline Sacramento Bureau

Small businesses know the power of collectives.

From agricultural co-ops to trade associations, small businesses frequently pool their resources and increase their buying power, leveraging better deals for their members.

That's the very idea behind the Small-Business Health Options Program.

State-based exchanges will go online in 2014, aiming to offer more affordable health insurance options in the individual market. At the same time, states will also create exchanges for small businesses. The Affordable Care Act leaves it up to states on whether these exchanges will be combined or run separately.

A series of articles last week in Health Affairs, supported by the Commonwealth Fund, lays out the benefits, pitfalls and possibilities of SHOP exchanges.

As Editor-in-Chief Susan Denzter noted, "These insurance stores for the small-group market ... sound simple in concept, but as [the articles] make clear, they are anything but."

Cost v. Choice

Jon Kingsdale, founding executive director of the Massachusetts Commonwealth Health Insurance Connector Authority, writes in his Health Affairs article that Congress' intent in creating SHOP was to help small businesses offer more coverage choices to their workers.

In another Health Affairs article, Timothy Jost, a professor at Washington and Lee University School of Law, points out that while offering small business employees a choice of health coverage options is "attractive in theory," it has "proved difficult for small employers to manage." Further, "[p]rice continues to be the most important consideration for small businesses; choice is less important," Jost posits.

Kingsdale echoes this theme, writing, "Both the buying preferences and the political agenda of small firms are remarkably clear: They want rate relief, as soon as possible."

Taking the Pulse

The Small Business Majority has been working over the last year to evaluate the efficacy of SHOP. The group is now convinced that the program could be a huge boon to small businesses across America -- if it is done properly.

A report the group released last week captures the concerns of exchange experts from across the country who gathered in Sacramento for three separate forums.

"We pulled together all of the ideas from the experts here in California and others outside of California," Terry Gardiner, vice president of policy and strategy at SBM, told California Healthline. "What will be the design and features of the exchange? That's what our forums were trying to address, so we brought in people familiar with exchanges, let them say what they went through, and the lessons they learned."

In line with Jost's and Kingsdale's points about cost, the report advises California's Health Benefit Exchange Board to "[r]emember small business owners' No. 1 concern: Cost."

Besides the three forums, SBM also conducted an eight-month-long road trip, hitting towns across California on a "listening tour" to gather reaction from small business owners to the ACA and SHOP.

Results of the tour published last year showed a high level of initial suspicion. However, once small business owners understood what SHOP had to offer there was support and a boatload of suggestions, Gardiner said.

"We heard from the actual grassroots business owners, a wide variety of business owners, and got tangible, real-life ideas about how to run an exchange," Gardiner said. The initial reluctance to the idea, he said, clearly stemmed from the rancor over health reform at the national level. 

"On Main Street in America, many small business owners still don't know that much about the SHOP exchange," Gardiner said. "So we found, on a real-life level, based on what we hear across the country and not just in California, this kind of thing is what people feel needs to happen."

Further Advice for Exchange Builders

Legislation in California requires the Health Benefit Exchange board to come up with a small-business exchange, separate from the individual-market exchange. The board released its own report last year on the viability of a small-business exchange. (The report was produced with the help of the California HealthCare Foundation, which publishes California Healthline.)

It concludes that "to succeed in reaching and retaining private employers, the Exchange will need to be viewed by employers as a trustworthy partner and to make employers' role in providing coverage to workers as simple as possible. This in turn requires that the Exchange make it easy for employees to understand their choices and provide or arrange for worker-friendly services."

That fits with the conclusions in the Health Affairs articles and from SBM's research -- that enrollment into a small-business exchange needs to be simple, coverage needs to be affordable and choice of plans is a plus, but not necessarily a reason by itself to participate.

A poll conducted last year in California by Pacific Community Ventures and SBM found that:

  • 55% of California small business owners would like to participate in the exchange;
  • 35% who currently offer insurance say having an exchange would make them more likely to continue offering coverage;
  • 32% who are not currently offering insurance say that having an exchange would make them more likely to offer coverage; and
  • Small businesses are skeptical of government involvement in health care, worrying that the quality of care will drop if government controls the exchange.

Gardiner added that it's important to his members that a SHOP exchange include a network of brokers or agents, a point he also made in one of the Health Affairs articles.

Small business owners spend their time running their business, not studying the Affordable Care Act," Gardiner said. "They like the idea of an independent body giving you reliable information. Right now, there is no reliable third party comparing these plans. I mean, there's no Consumer Reports for health insurance plans."

Here's a look at what else is happening in health reform.

Rolling Out Reform

  • The success of the federal health reform law might depend on efforts to educate and train nearly 30,000 additional primary care physicians by 2015. Barring a successful legal challenge, the overhaul is expected to extend health coverage to an additional 32 million residents. As a result, the health care system will require an additional 29,800 primary care physicians to meet the needs of the newly insured. Last year, the White House launched the Primary Care Residency Expansion program, which trains new primary care residents who agree to work in underserved communities (Kliff, Washington Post, 2/10).
  • Only about 45,000 U.S. residents have signed up for the temporary high-risk insurance pools established by the federal health reform law, well below the 375,000 individuals that were projected to enroll in the plans by the end of 2010. States had the option of running their own high-risk pools or have the federal government run a pool for them. Cost has discouraged many individuals from enrolling in the federally run pools. After HHS lowered premiums for the 24 high-risk pools it runs, enrollment grew, though more slowly than expected (Millman, Politico, 2/13).
  • The American Medical Association last month expressed concern that HHS' essential benefits guidance might allow states to adopt standards that would lead to inadequate benefits for children and insufficient coverage for prescription drugs. In a letter to HHS, AMA Executive Vice President and CEO James Madara said the "benchmark options" outlined in the guidance do not meet the standards of providing the preventive, diagnostic and treatment services medically necessary for children. Madara added that the proposed minimum coverage for prescription drugs is insufficient, noting that it would require health plans to only cover one medication per drug class, compared with at least two under Medicare (Trapp, American Medical News, 2/13).

In the States

  • In a party-line vote last week, a Colorado Senate committee rejected legislation that would have voided a law to create the state's health insurance exchange if the U.S. Supreme Court finds any part of the federal health reform law unconstitutional (Sealover, Denver Business Journal, 2/3).
  • Minnesota Gov. Mark Dayton (D) continues to work on establishing a health insurance exchange despite a lack of support from the state Legislature. Dayton's decision was partially influenced by the limited amount of time the state has before the Jan. 1, 2013, deadline established by the federal health reform law. During the last legislative session, Republicans -- who control both houses of the Legislature -- voted down an exchange bill (Stawicki, Minnesota Public Radio/Kaiser Health News, 2/7).

Challenges to Reform

  • Last week, the American Center for Law and Justice -- on behalf of 119 House Republicans -- filed a brief with the U.S. Supreme Court arguing that the individual mandate in the federal health reform law is unconstitutional. The brief stated that the health coverage requirement is "inconsistent with our constitutional tradition." ACLJ previously appealed a decision by the U.S. Circuit Court of Appeals for the District of Columbia that the overhaul is constitutional (Norman, CQ HealthBeat, 2/8).
  • On Monday, 43 Senate Republicans filed a brief with the U.S. Supreme Court urging the high court to declare the individual mandate unconstitutional. "This same rationale would allow Congress to punish individuals for not purchasing a host of health-related products, such as vitamin supplements, the use of which could lower aggregate health costs," the brief states (Baker, "Healthwatch," The Hill, 2/13).

Spotlight on ACOs

  • In a recent post on New Jersey Spotlight, Rutgers University Center for State Health Policy Director Joel Cantor wrote that there are significant differences between the accountable care organizations in Medicare and New Jersey's Medicaid program. Cantor explained how the Medicare Shared Savings Program allows ACOs to pick and choose patients. In comparison, he added that the New Jersey Medicaid ACO model "avoids these perverse incentives" and pushes ACOs to provide care for all patients (Cheung, FierceHealthcare, 2/7).

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