During the lead-up to the rollout of the health care law a year ago, President Obama was adamant that new insurance marketplaces for small businesses would provide a start-to-finish online shopping experience for employers, where they could compare and buy plans with the click of a mouse. In addition, he said, by placing rates from different insurers side-by-side and offering tax breaks, the marketplaces would provide less expensive plans that what had been available to small companies.
On that first promise, the law hasn’t delivered. Only a handful of states offered a fully functioning online small business exchange, commonly referred to as SHOP exchanges, during year one, leaving many employers to continue buying plans using paper applications. And while many of the portals are expected to come online this fall, some states aren’t slated to launch their online employer marketplaces until early next year.
But what about that second promise, of more affordable health plans?
It appears, based on one new study, that the exchanges are delivering.
Health plans available to small businesses on the law’s new health marketplaces are on average about 7 percent cheaper than comparable plans offered elsewhere, according to analysis conducted by a team of researchers at the National Opinion Research Center at the University of Chicago. For middle-tier plans, for instance, the disparity translates into about $220 in annual premium savings for plans purchased on the SHOP exchanges.
“It’s definitely surprising,” said Jon Gabel, a senior fellow at the center, noting that many insurers had expressed disinterest in selling plans on the SHOP exchanges. “So, I expected them to price those plans higher than the plans sold off the SHOP, but it didn’t turn out that way — in fact, just the opposite.”
Gabel’s team conducted the analysis using information pulled from state insurance databases in 26 states, 15 of which built their own exchanges and 11 of which defaulted to the marketplace built and run by the federal government. States not included in the study were ones in which health insurance data wasn’t made available.
So what’s behind the lower rates on the new exchanges? In part, Gabel said, the results can likely be attributed to the one of underlying premises behind the exchanges — that is, to drive up competition among insurance carriers by placing their rates next to one another for shopping comparison. Indeed, health officials have reported cases of insurers revising their rates on the marketplaces after seeing lower prices from their competitors.
However, there are likely some other factors at play, too. In many cases, Gabel said, the plans available on the exchanges may have a more narrow provider network, which would drive down the price but perhaps leaving small employers and their workers with more limited options when they need to visit a physician. In addition, he noted that some of the plans offered in the non-exchange marketplace may offer more non-essential benefits.
Despite the potential trade-offs, offering plans at even slightly lower rates than what’s available in the private market could make all the difference for the SHOP exchanges, most of which have thus far failed to gain any real traction with employers. Another recent study conducted by research center showed that, among small business owners who do not currently offer health coverage, 82 percent said their decision to start providing insurance would depend on prices being lower than they are today.
In addition, 83 percent said that the availability of tax credits would be an important factor and 90 percent say they would want to send only one check per month to cover all their workers’ premiums — both features that available to small businesses only through SHOP marketplaces. More than four in five said being able to compare different plans online would make a difference — an option that will eventually be available nationwide.
Should prices remain relatively low once the technical problems are all sorted out, Gabel said, the findings bode well for the value small businesses are likely to see in the exchanges.