It’s official: Obamacare’s small-business exchange is partially delayed

June 1, 2013

A few months back, the Obama administration took flak for initial plans to delay part of Obamacare's small-business exchange.

The idea, floated in regulations last month, wouldn't put off the Small Business Health Options Program, or SHOP, altogether. Small businesses could still buy coverage for their employees on the new exchanges. What would be put off a year was an employee choice component: Rather than have each worker pick a plan, the employer would pick one insurance provider for everyone.

Those were preliminary regulations that got 40 comments from interested parties, some of whom urged the White House to rethink its decision and allow for employee choice in the first year of the exchanges' operation.

On Friday, Health and Human Services issued its final regulation, and the delay still stands, with federal officials noting worries about getting the choice function ready to launch in less than six months.

"We have serious concerns that issuers would not be operationally ready to offer [health plans] through the SHOP if we implemented employee choice for 2014," they write in the final regulation.

The final regulation is essentially the final word; it means that in 2014 many small businesses will need to choose one insurance plan for their employees, rather than leave the decision to workers.

The "many" in that sentence is important: The federal government's rule applies only to the 33 states where HHS has a hand in running the exchanges. In the 17 state-run marketplaces and the District of Columbia, governments are free to move ahead with an employee choice model. Some, like Connecticut's exchange, have already announced plans to do so.

How much does this matter? In the regulation, HHS contends that there is still significant benefit for a small-business owner shopping on the new health exchange.

"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," the department argues. "Further, plans sold on the SHOP must be certified as QHPs [qualified health plans], meaning that they must meet minimum standards in order for issuers to sell them on the SHOP."

This isn't a stand-in for employee choice by any means, which was always one of the SHOP's main selling points. Nevertheless, the federal government wants to make the case that employers will still gravitate to the new market, which will be better organized than what exists right now. Come October, we'll get a sense of whether they're right.

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Ezra Klein | June 1, 2013