Small businesses push back on D.C. insurance-exchange mandate

The District’s small businesses may have to buy their employee health insurance through a city-run exchange come 2014, following a controversial vote by a city board.

The D.C. Health Benefit Exchange Authority, charged with implementing the federal health-care overhaul, voted Wednesday evening to accept a recommendation that all health-insurance plans sold in the city for 50 members or fewer must be purchased through the exchange.

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Exchanges, a key mandate of the federal overhaul, are intended to make buying insurance more transparent, accountable and affordable. But while much of the national focus has been on creating exchanges for individual health plans, the District is only the second jurisdiction to limit the small group plans typically purchased by employers to an exchange.

The decision is driven largely by D.C.’s small individual-insurance market. The District’s population is not only smaller than 49 states, but it also boasts an above-average rate of insurance coverage, driven by the high percentage of residents enrolled in Medi­caid or a District-funded health plan for low-income residents not eligible for Medicaid.

“For the exchange to be sustainable, it has to have approximately 100,000 people,” said Mohammad N. Akhter, the authority’s chairman. “If the exchange isn’t sustainable in the long haul, if it does not have enough people, then we are wasting our time and our effort. ”

A report prepared last year for the D.C. Department of Health Care Finance said that in 2010 about 19,000 residents pur­chased individual health-insurance plans. The report also cited federal data from that year showing 7,300 District employers offered plans to 50 or fewer workers — about 125,000 employees in all.

Wednesday’s vote of the authority’s seven-member executive board was unanimous, despite withering opposition from the business community, which main­tains the exchange will lead to higher costs and less flexibility for employers.

A September letter signed by a coalition of more than 150 small businesses and associations said the exchange mandate betrayed “President Obama’s repeated assurances that, ‘If you like your health plan . . . you will be able to keep your health care plan. Period.’ ”

The businesses called the exchange “an undefined, untested, more expensive entity” that would offer “standardized, cookie-cutter coverage.” Plans sold through the exchange will have to meet coverage requirements imposed by the Obama health-care law and additional requirements mandated by the authority.

“The diversity of small employer health plans currently available in the District cannot be replicated in the standardized plans offered by the Exchange,” the letter said. It said there was a need for plans that “complement each employer’s unique budgetary and financial situations.”

Only Vermont, with a similarly small individual-insurance market, has also moved to restrict its small group market to an exchange.

Hannah Turner, a spokeswoman for the small-business coalition, said the exchange mandate is an “extreme choice” that seeks to solve problems that might not materialize. “The concern is about all these additional costs that are being added onto premiums that are already skyrocketing,” she said. “All of these things are just adding onto small-employer costs.”