The Obama administration has delayed part of the health care law designed to give small business owners and employees more flexibility when purchasing insurance, which could temporarily undermine lawmakers’ intent to drive down the cost of health coverage.
Starting next year, the Affordable Care Act requires the government to offer small business health insurance exchanges — basically, online marketplaces that are expected to provide less expensive insurance plans to small employers. Originally, the exchanges were supposed to let small business owners offer their employees a choice between several options, which experts believe would help bring down rates.
However, citing operation challenges, the administration has delayed that component until 2015.
Until the exchanges are fully functional, most business owners will be limited to selecting just one plan to cover all their employees under the new federal system. Some may have additional choices if their states run exchanges with more flexibility.
“My understanding is that this was one the ways they sold the bill, that this would bring down the costs for small businesses,” said Jody Manor, who owns a cafe and catering company in Alexandria, Va. and was featured in an earlier story on the health care law. “Here was the option to have more competition in the market, and it’s being delayed. It’s really disappointing.”
Small business owners often pay higher premiums for health care than large employers, primarily because the latter have a bigger pool of workers to shoulder the risks and therefore receive more flexible plans from insurers. In pushing the health care law through Congress, President Obama and Democratic leaders insisted that the bill would help level the playing field for large and small employers.
The plan was to offer smaller firms the same multiple-plan and employee-choice options available to their bigger counterparts, but allow employers to pay one lump sum to the exchanges, which would then distribute the payments to each insurance company. Thus, business owners would have added flexibility without the added billing and administrative requirements.
Now, that flexibility must wait at least another year.
Small business advocacy and lobbying groups echoed Manor’s sense of frustration with the delay; however, they brushed aside the notion that the holdup would have significant repercussions for small firms.
“It’s a hiccup,” John Arensmeyer, president of Small Business Majority, a lobbying organization that has long supported the health care law, said in an interview. “It may have a brief impact on the pressures we hoped would push down cost, but the absence of these features for one year will not make a huge difference.”
Arensmeyer warned that the delay may deter some employers from registering on the exchanges during the first year, and for those who do, fewer buyers may mean slightly higher prices for coverage. However, he said the one-year setback should not outweigh the benefits of other provisions that are designed to bring down costs, like a strict insurance rate review process and a mandate that 80 percent of small business insurance premiums go directly to the cost of providing care.
Meanwhile, even limited-option small business exchanges will retain some of their potency to drive down costs, as insurance providers that offer plans through the individual exchanges must also offer plans in the small business marketplace. The more offerings employers have to choose from (even if they must choose only one for the time being), the more incentive providers will have to offer competitive rates, he said.
A policy expert at the National Federation of Independent Business, which spearheaded a campaign to overturn the law, agreed that the delay will have only fleeting effects for businesses on Main Street.
“It’s a little more than a minor setback,” Kevin Kuhlman, manager of legislative affairs for NFIB, said about the administration’s announcement. “These small business exchanges were supposed to compete on price, quality and choice, and now you’re taking away that choice element for one year. So it’s a disappointment, but it‘s not the end of the world.”
Republicans in Congress offered far more severe warnings.
“One of the reasons small business owners were promised that costs could drop was the competition envisioned by the health care law’s SHOPs,” House Small Business Committee Chairman Sam Graves (R-Mo.) wrote in a letter to the Department of Health and Human Services. Due to this latest delay, he said, “it is likely that entrepreneurs will continue to experience the premium increases they have come to expect.”
Meanwhile, in an e-mail to The Washington Post, House Ways and Means Chairman Dave Camp (R-Mich.) criticized the president for pulling back on his promises to small business owners and their workers.
“Employees at small businesses often face the highest health-care costs of any worker,” he wrote. “Instead of fulfilling the promise to help these families, the administration is backing away and leaving them with even fewer options for finding health care plans that they want and can afford.”
But for Manor, the cafe owner, having fewer options isn’t nearly as detrimental as simply prolonging the wait for the new system to be fully implemented.
“Shouldn’t health care be simple?” Manor asked. “Right now, they’re playing politics, and that’s frustrating.”