Some States Are Pushing ‘Employee Choice’ For Small Business Insurance

July 11, 2013

Small business workers in at least 15 states and the District of Columbia may have a menu of health insurance choices next year, something that didn’t seem likely a few months ago.

Back in April, federal officials concerned about the potential for major glitches put off until 2015 a provision that would offer small businesses owners a way to allow their employees to choose from among a variety of competing plans in the new online marketplaces being overseen by the Obama administration.

Similar to last week’s announcement of a one-year delay in the requirement that businesses with 50 or more workers provide coverage or pay a fine, the move to delay the “employee choice provision” was cited by opponents as an example that the health law was in trouble.

Still, the decision at the time relieved insurers, who feared there wasn’t enough time left to sort out operational complexities, but proponents lamented a loss of choice for employees.

But now, as new marketplaces prepare to open for enrollment Oct. 1, it appears that most of the states creating their own online marketplaces are going ahead with “employee choice” for small business workers, researchers at Georgetown University’s Health Policy Institute found in a report Thursday for the Commonwealth Fund.

By doing so, the states hope to make the small business marketplaces — for firms with 50 or fewer workers — more attractive to employers and workers, said co-author Sarah Dash.

The “choice” option will not be available in the 33 states whose new marketplaces, also known as exchanges, are overseen by the federal government.  Small employers will still have the option of shopping for coverage through the marketplace, but workers’ choice of plans will be limited to the one their employer picks.

In the 17 states doing their own marketplaces, 15 intend to offer the choice model, as will the District of Columbia, according to the report. Idaho is not including an employee-choice program because it is using the federal marketplaces’ information technology platform, which will not include it. New Mexico is still considering its options.

Under the state programs moving forward, a business owner could pay a set amount toward coverage for each worker, then let each employee go to the Small Business Health Options Program, known as the SHOP exchange, to select from a variety of plans.  Workers could choose to pay the difference if they wanted a more expensive plan, or potentially see all or most of their premium covered if they chose a less costly one.

Insurers raised concerns late last year that the SHOP marketplaces will be very complex – and feared the marketplaces would not be ready to handle those issues this fall. They did not want to be required to participate unless there was a delay.

On Wednesday, Alissa Fox, a senior vice president of Blue Cross Blue Shield Association, said it is “news to us” that so many states were moving forward.

“Our strong recommendation for the past three years is that the focus needs to be on getting the individual marketplace up and running and getting the core functions done right,” said Fox. “Any functions not critical to that core mission should be put off so we get it right for consumers.”

Seven states – Hawaii, Minnesota, Nevada, New York, Oregon, Rhode Island, and Vermont – will allow workers the widest variety of choices, selecting from across multiple insurers and coverage levels,  the report says. Other states will allow workers to choose among plans at a specific level of coverage selected by the employer.

State marketplaces, Dash said, are responsible for ensuring they have the technology available to track the worker choices, a complex challenge.  At least two states have slowed their effort: In Washington state, not enough insurance carriers applied, so the state will pilot its employee-choice program in only one region of the state, said Dash.

In Maryland, the small business section of the online marketplace won’t open for enrollment until Jan. 1, 2014, three months behind the opening of the market to individuals.  Coverage under the small business program won’t begin until March 1, 2014, according to minutes from the board overseeing the state’s marketplace.

Under the health law, small businesses are not required to offer coverage or use these marketplaces. Workers at firms not offering health insurance would be able to go to a parallel online marketplace for individuals, which is also being set up by the federal government and the states.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.

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