Health care law’s employer exchange — is it helping or failing small businesses?


CMS’s Gary Cohen updated lawmakers Wednesday on the progress of the new small-business insurance exchange. (Andrew Harrer/Bloomberg)
December 12, 2013

Ask Gary Cohen, deputy administrator for the Centers for Medicare and Medicaid Service, how the federal government’s new health insurance marketplace is working for small business owners, and he will assure you it’s “making it easier for them to find and purchase employee health coverage.”

Ask many members of the House Small Business Committee, and they will tell you they’re hearing the opposite from employers back home in their districts.

“Our small businesses are seeing their costs go up,” Rep. Scott Tipton (R-Colo.) said during a hearing held by the committee on Wednesday, in which Cohen, part of the team in charge of building the online marketplaces, was asked to provide the committee with an update on the federally operated small-business exchange. “It’s very disturbing coming from a rural area with a lot of small businesses.”

In a sense, the hearing was a microcosm of the public relations war the two parties have waged over the state of the new online health insurance portals, with Democrats casting them as a work-in-progress and Republicans touting them as a total failure. On Wednesday, focus was on the small-business marketplace, a separate portal from the individual exchange, both of which have suffered a number of setbacks since they were launched in October.

Cohen says the federal small-businesses marketplace, commonly know as the SHOP exchange, is already giving employers access to more affordable health care options. Through the exchange, he said, employers with no more than 50 workers can compare 914 health plans and another 511 dental plans, many of them at a lower cost than what is available in the private market.

Related: Health care law’s many defitintions of “small business”

In addition, companies with fewer than 25 workers that purchase plans through the federal marketplace can access tax credits equaling up to half the cost of care, making relatively inexpensive plans all the more affordable for the smallest firms. Hundreds of thousands of employers have already taken advantage of those credits, Cohen said.

All told, “the SHOP, combined with new insurance reforms and tax credits provided by the Affordable Care Act, gives employers new options to provide their employees with high quality, affordable health care,” he said.

However, those new options are only helpful if small business owners can readily access them, lawmakers shot back, and that’s where the real problem exists.

Once promised a online system that would make purchasing health care plans as simple as purchasing flights through travel Web sites like Priceline or Expedia, small business owners have been, for at least the first year, left with a process awfully similar to the one they have always used to purchase insurance.

That’s because CMS officials recently announced that the SHOP Web site would not be ready to actually enroll employers and their employees until November of 2014—the third time in as many months the launch of a fully functional site has been delayed. Instead, for at least the next year, employers who want to purchase plans through the government-run exchange (a must for those hoping to take advantage of the tax credits) must submit paper applications and enroll through a broker, agent or directly through an insurance company.

Cohen acknowledged that the revised system does little to make the process simpler for small business owners, noting that it “is similar to how most small employers get insurance today.”

In addition to having an online enrollment portal, small business owners were supposed to be able to choose different plans for different workers — an option meant to help them better control their health costs and another, as Cohen described it, “key value proposition of the SHOP marketplaces.” Officials earlier this year announced that feature would not be available in 2014, either.

“The administration promised the SHOP exchanges would expand health insurance coverage options for small businesses, they would increase small business purchasing power to lower costs, and give consumers, not insurance companies, control over their health care,” Rep. Sam Graves, the committee’s chairman, said during his opening remarks. However, he added, “the reality that small businesses and the public are experiencing are far different.”

Democrats on the committee agreed that the rollout has been rocky. However, some say the perks of the health insurance marketplaces for employers will, in the end, overshadow the initial frustrations.

“Although there have been bumps in the road, optimism remains high because of long-term benefits the SHOPs will bring,” Nydia Velazquez (D-N.Y.), the ranking Democrat on the panel, said during the hearing Wednesday.

Noting that most small business owners currently use a broker to purchase health care, she later argued that “the fact that we don’t have the Web site does not hinder the ability of small businesses to get into the health care marketplace.” Cohen later echoed a similar point, noting that whether employers enroll online or via paper applications will not change the price of their coverage.

Maybe not, but it means the process has not become any easier, Graves said, and that was one of the key benefits of the exchange employers had been expecting. Meanwhile, the repeated delays for a fully functioning Web site, he said, leave small business owners with a cloudy notion of what to expect in the coming months, be it further delays or other potental setbacks.

“We hear from small businesses all the time about uncertainties. . .and this has been the epitome of uncertainty,” Graves said.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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