Calm down, Joe Klein: Reports of the small business exchange’s death are greatly exaggerated

April 5, 2013

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition — and read all previous columns here.

The health law's Small Business Health Options Program — the SHOP Exchange, as it was known — was never much of an attention-getter. I remember attending a conference a few years ago, where I heard one SHOP expert lament how everyone focuses on the individual market exchange, as if the small business exchange didn't even exist.

Not anymore: After The New York Times reported the Obama administration's plans to delay part of the SHOP exchange, it's gotten plenty of attention. "One thing is clear," Time columnist Joe Klein declared. "Obamacare will fail if he [the President] doesn’t start paying more attention to the details of implementation."

Before things get too apocalyptic, let's review what happened — and what it means for the Affordable Care Act.

While the law's main focus was extending coverage to millions of Americans without health insurance coverage, it was also meant to help small businesses. They don't have the leverage of larger companies to demand low premiums, and end up paying 18 percent more for health coverage as a result.

The SHOP was an idea proposed by Sen. Dick Durbin (D-Ill.) to "help small businesses and bring them into the health reform fold," writes John McDonough, who served as a health policy adviser to Sen. Ted Kennedy (D-Mass.) during the health-law debate.

Here's how it would work. A small business would decide it wanted to provide insurance to its employees, but didn't have the time or money to deal with the hassle of finding an insurance plan and picking the best option. Instead, it would contribute a set amount to each employee's health premiums, send that money over to the health exchange and let employees go wild picking their own coverage.

"As the employer I don't have to worry if one employee wants Aetna and another wants Kaiser," Small Business Majority president John Arensmeyer said. "So that's a really great, additional benefit."

When the exchanges open in 2014, employers will still be able to contribute a set amount to their employees' health premiums through the SHOP exchange. But under a newly-proposed rule — the rule that's attracted all the attention — small business employers on the federal exchange will pick just one plan for all of their workers rather than letting each worker pick their own plan.

The employer will have to decide on Aetna, Kaiser or whatever other insurance option — and that's a lot like what they already do right now. Instead of sending their money to an exchange, they send it directly to an insurance company.

I asked Arensmeyer how much of a setback this was for small businesses, given that his group has been a really big advocate for the health-care law.

"It's unfortunate, and we're disappointed," he said, "But it's not the end of the world. We've voiced our opposition, but we don't want people to think they're throwing the baby out with the bath water."

The reasons for disappointment are obvious: Employers thought they would be able to offer their employees a range of health plans and now, in some states, they won't have that option, at least at the outset.

This rule only applies to the 33 state exchanges where the federal government is setting up the marketplace. In 17 other states, they still have the option to offer the full array of insurance choices to their employees. Arensmeyer has kept an ear to the ground and says he hears that most states, where they're setting up their own exchange, plan to move forward with that option.

Second, there is still one big advantage of buying on the exchange: Pooling. One of the reasons small businesses would want to buy on the exchange is that they'd be joining a pool of thousands of other people, in small businesses or buying on their own, also on the marketplace. That would give them the kind of leverage to drive down health premiums much like large companies do.

Third, the option has not disappeared completely for states that don't run their own exchanges. Instead, it's been delayed for a year, and then will take effect. So while Arensmeyer does expect fewer small businesses to use the health exchanges in 2014, he's less sure that there will be a long-term effect on enrollment.

"It's reasonable to assume fewer people sign up in the first year," Arensmeyer said. "That being said, it's not a determinant on what will happen in 2015. We certainly are going to be out communicating to businesses about the benefits available then."

As to what this means for the larger health-care law, it seems possible to read it one of two ways. The first you might call the apocalyptic reading, that this is just the first in a long line of delays that will ultimately lead to the Affordable Care Act's unraveling. The logistical challenges with this issue, cited by Health and Human Services, will quickly become clear in other parts of the law as we edge closer to 2014.

But there's another reading of this, one that suggests the Obama administration has realized it can't do everything and, in lieu of that, is smartly focusing on the absolutely essential parts of the health-care law, making sure that those do turn out well. HHS is in the middle of building dozens of complex marketplaces that it thought states would be managing, and doing so on an tight timeline.

Neither situation is ideal for the Obama administration; it would certainly like to see all parts of the law rolling out on time. But the fact that it has decided to focus on the very core elements of the law, at the expense of other important but less central pieces, doesn't necessarily suggest doom and gloom on the horizon. It's pretty much what you'd expect from an administration that's been forced to do more of the implementation than it  anticipated, but that is, in fact, paying close attention to the details.

KLIFF NOTES: Top health policy reads from around the Web. 

Walgreen's makes a bold move in health care. "It's not just sore throats and flu shots anymore. Walgreens Tuesday became the first retail store chain to expand its healthcare services to include diagnosing and treating patients for chronic conditions such as asthma, diabetes, and high cholesterol. The move is the retail industry's boldest push yet into an area long controlled by physicians, and comes amid continuing concerns about healthcare costs and a potential shortage of primary care doctors." Julie Appleby in USA Today.

The Arkansas Senate moves forward on privatizing the Medicaid expansion. "A proposal to use federal money to purchase private insurance for 250,000 low-income Arkansas residents passed Friday in the state Senate, advancing an idea that Republican legislative leaders and Democratic Gov. Mike Beebe are promoting as an alternative to expanding Medicaid enrollment. By a 24-9 vote, the Republican-led Senate approved the "private option" proposal that GOP lawmakers and Beebe have negotiated as a compromise over the Medicaid expansion called for under the federal health care law." Andrew DeMillo in the Associated Press.

Aetna is giving brokers a playbook to dodge Obamacare rules. "One of the largest health insurance companies in the United States is advising insurance brokers on how to evade new mandates and benefits set to take effect next year under President Barack Obama's health care reform law. In an email sent to brokers, the insurance giant Aetna explains how they can renew customers' current health plans before Jan. 1." Jeffrey Young in the Huffington Post.

Continue reading
Comments
Show Comments
Most Read Business

business

wonkblog

Success! Check your inbox for details.

See all newsletters