Tag Archive: Small Business Health Options Program

Individual market could turn into SHOP’s biggest competitor

In a post last December, I characterized small group as the most voluntary – and consequently the most vulnerable – health insurance market segment notwithstanding Patient Protection and Affordable Care Act reforms designed to improve it. Whether these reforms will ultimately help shore up this distressed market segment remains to be seen, I wrote at the time.

A key ACA reform to create market power on the buy side to help drive down rising premiums – small employers identify high premiums as the biggest barrier to covering their employees – is the mandate each state health benefit exchange establish a voluntary small employer purchasing pool known as the Small Business Health Options Program (SHOP). However, experts have recently suggested that in the eyes of potential small employer SHOP enrollees, SHOP’s biggest competition could come from the individual marketplace as they cease providing employer-sponsored coverage.

Ezekiel J. Emanuel, who helped draft the Affordable Care Act as a health policy adviser to the Obama administration, had this to say to The New York Times small business blog You’re the Boss:

I’ve always been a bit perplexed by the idea of setting up a SHOP exchange, since I don’t understand why it’s just not better if you’re a small business to say, all right, everyone, I’m just going to give you X amount of dollars and let you shop in the individual market. That seems to me to be a way to go – why should a small business set up a lot of machinery around it? Why should exchanges set up a lot of machinery? And it would be better for exchanges to have these workers in the individual exchange.

As small employers who early renewed plan year 2013 plans late last year migrate to ACA-compliant plan year 2015 plans, a quarter of small group plan members could end up moving to individual coverage from November 2014 through January 2015, estimates health insurance industry veteran and consultant Michael Lujan. Lujan is former SHOP director at California’s exchange, Covered California.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Small group most voluntary market segment under ACA – and faces unique viability risks

Of the three major health insurance market segments – large group, small group and individual – small group is the most voluntary market under Patient Protection and Affordable Care Act rules that take effect January 1, 2014.

Large employers, defined by the ACA as employing 50 or more full time workers, are subject to the employer shared responsibility requirement to offer coverage to nearly of these employees. All individuals must have some form of health coverage under pain of a tax penalty for going bare. Small employers on the other hand have the greatest degree of freedom of choice as to whether to play in the small group market.

The ACA strengthens the functionality of the small group market with several provisions. It eliminates risk rating of small employers by health plan issuers. The ACA also enhances the risk pooling power of small employers by combining them into single statewide risk pools. Finally, the law affords small employers the purchasing power of large employers through the Small Employer Health Options Program (SHOP) of the state health benefit exchange marketplace. The SHOP also serves as a benefit administrator of sorts for small employers, helping them select plans and billing them for monthly premiums.

The extent to which these reforms work as intended to shore up the small group market will become clearer over the next few years. There are several factors that could result in the leakage of potential covered lives out of the small group market, potentially adversely affecting the viability of the small group pool and the SHOP, particularly if a significant number of small employers now offering health coverage to their employees adopt them. They include:

  • Opting to participate in “private” exchanges set up by health benefit plan administrators and insurance brokerages instead of the SHOP
  • Offering a defined contribution benefit or stipend to help workers buy their own coverage on the state exchange individual marketplace instead of directly offering coverage
  • Self-insuring for employee health care costs.
 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Final rule directs members of Congress, staffers to DC SHOP exchange

The Office of Personnel Management (OPM) has issued a final rulemaking to be published in the Federal Register this week that directs members of Congress and designated staffers who avail themselves of government funded premium contributions to obtain coverage through the District of Columbia health benefit exchange’s Small Business Health Options Program (SHOP).  The Patient Protection and Affordable Care Act requires each state exchange marketplace to establish a SHOP to offer employers of 50 or fewer employees qualified small group health plans.

OPM explained its reasoning in the preamble to the final rule:

The proposed rule was silent on whether eligible individuals would select qualified health plans through an Exchange in the individual or small group market by way of the SHOP. Because a Government contribution is, in essence, an employer contribution, the final rule clarifies that Members of Congress and designated congressional staff must enroll in an appropriate SHOP as determined by the Director in order to receive a Government contribution. SHOPs are designed to provide employer-sponsored group health benefits and are, therefore, the appropriate environment in which to provide an employer contribution to Members of Congress and congressional staff. Further, this ensures that Members of Congress and congressional staff do not have additional choices in the individual Exchanges with a Government contribution that other individuals lack. Given the location of Congress in the District of Columbia, OPM has determined that the DC SHOP, known as the DC Health Link Small Business Market administered by the DC Health Benefit Exchange Authority, is the appropriate SHOP from which Members of Congress and designated congressional staff will purchase health insurance in order to receive a Government contribution. OPM intends to work with the DC Health Benefits Exchange to implement this rule.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Shifting employment landscape complicates ACA implementation

When the Patient Protection and Affordable Care Act was drafted, it contemplated preservation of employer-based health coverage that came about in the 1940s and which continues to serve as the primary form of coverage for working age Americans.  In preserving employer-based coverage, the Affordable Care Act assumes most people will continue to obtain their incomes – and their health coverage – via full time employment.

It also assumes small employers will for the most part want to provide health benefits to their employees provided they have access to quality, affordable plans, reinforced by the law’s reforms of small group markets and pooling their purchasing power via the health benefit exchange Small Business Health Options Program (SHOP).

However, there are multiple, large scale shifts altering employment in the United States and the health benefits that have historically come with it for more than six decades:

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

WellPoint’s Anthem Blue Cross spurns Calif. small-business exchange – latimes.com

Health insurance giant Anthem Blue Cross said it won’t participate in California’s new insurance market for small businesses.

Anthem, a unit of WellPoint Inc., is California’s largest insurer for small employers. This surprising move could hamper the state’s ability to enroll businesses in its new exchange called Covered California that opens Jan. 1 as part of the federal healthcare law.

Instead, Anthem said it will keep selling coverage to small firms outside the exchange in direct competition with the state-run market. Anthem also remains one of 13 health insurers that will offer policies to individuals in Covered California.

via WellPoint’s Anthem Blue Cross spurns Calif. small-business exchange – latimes.com.

This development isn’t a propitious one for the California Small Business Health Options Program (SHOP) exchange marketplace. Not having a payer with such a significant market share could make it harder for the SHOP to attract small employers. Unlike the individual exchange marketplace, the SHOP relies almost completely on market aggregation forces to improve affordability, competition and choice in this market segment. Covered California is expected to announce participating SHOP plans for 2014 early next month.

In 2011, the California HealthCare Foundation estimated Anthem Blue Cross had 22 percent of the Golden State’s small group market, covering 548,000 enrollees.

 

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Risky Health Insurance Bets Could Backfire for Small Employers – Businessweek

Risky Health Insurance Bets Could Backfire for Small Employers – Businessweek

Small employers lacking bargaining power with insurers have in recent years fled the small group health insurance market to escape rising premium costs by opting to self insure their workforces’ medical costs.  That trend is colliding with Affordable Care Act reforms designed to make small group coverage more accessible and affordable, in turn reducing the number of medically uninsured small business employees.  The two primary ACA reforms aimed at boosting the health and viability of the small group market: 1)Mandating insurers underwrite all small employers as a single risk pool and; 2) Requiring states to create separate small business marketplaces within their health benefit exchange marketplaces in order to aggregate small employers’ purchasing power.

Insurance market reforms such as these won’t be as effective if small employers don’t participate in the small group insurance market.  Less participation reduces the size of the small group pool — and potentially the ability of the Small Business Health Options Program (SHOP) in state exchanges to concentrate sizable numbers of small employers to drive a better deal with insurers on premium rates.

There’s another even more worrisome risk facing policymakers as this Businessweek article points out.  Small employers playing in both the insurance and self-insured markets and moving in and out of each depending on the health status and claims experience of their employees.  Doing so would provide them a means to create adverse selection against the insurance market by opting to insure when their medical claims costs rise and self insuring when claims costs are low.

State policymakers are addressing this concern by making self insurance a less palatable option for small employers based on model law adopted by the National Association of Insurance Commissioners limiting the use of stop loss coverage that covers self insured employers once medical costs reach a specified amount such as the Colorado measure mentioned in the Businessweek story and SB 161 pending before the California Legislature.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Washington exchange garners strong plan interest for individual market, but limited for SHOP

The Washington Health Benefit Exchange reports nine health plan issuers have filed with that state’s Office of the Insurance Commissioner (OIC) to offer 57 Qualified Health Plans (QHPs) totaling 229 plan options for individuals and families through Washington Healthplanfinder, the state’s new online health insurance marketplace.

Plan issuers however demonstrated less interest in participating in the exchange’s Small Business Health Options Program (SHOP).  SHOP plans will be offered in only some of the state’s counties beginning Oct. 1, 2013.  In a news release, the exchange cited limited carrier participation that did not allow the Exchange to offer SHOP coverage options statewide.  Kaiser Foundation Health Plan of the Northwest will offer SHOP coverage in a limited number of counties to be determined, according to the exchange.

“Like our individual market, the SHOP was prepared to be operationally ready on Oct. 1,” said Washington Healthplanfinder CEO Richard Onizuka. “Ultimately, insurers informed us their inability to participate was a resource issue,” Onizuka explained, adding that additional issuers have expressed interest in participating in the SHOP market starting October 2014.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

To pool or not to pool

That is the question some small businesses are confronting, with those with healthy employees considering opting out of the insurance pool and paying workers’ medical costs themselves. Today’s Wall Street Journal has the story. 

As the story notes, self insurance can be a high risk proposition for companies of fewer than 100 workers since they don’t benefit from risk spreading as do larger (and insured) businesses.  That’s why it has traditionally been employed solely by larger businesses.  However, as small employers sought relief from rising insurance premiums over the past decade, some turned to self insurance.

From the perspective of policymakers, the timing of the trend is highly inconvenient given the rollout of Patient Protection and Affordable Care Act reforms in 2014 that require insurers to treat all small employers in a given state as a single risk pool, prohibiting them from risk rating a small enterprise based on the health status of its work force.  Policymakers worry that if too many small employers self insure their medical risk, it will hamstring the Small Business Health Options Program (SHOP), the small employer exchange marketplace, and foster adverse selection against the small group market as a whole if small employers with older, less healthy workers concentrate in it.

California legislation intended to make self-insurance among small employers a less attractive option by limiting their ability to insure medical claims that reach relatively low dollar amounts – known as stop loss coverage – continues to advance this year after a similar measure stalled in 2012.  SB 161 is supported by the Department of Insurance and some large insurers and opposed by business and producer groups.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Utah to operate its own SHOP, have federally-facilitated individual exchange under deal with federal government

Early this year, Utah received conditional approval to operate a state-based health insurance exchange marketplace from the federal government.  The approval was somewhat surprising given the state’s insistence on operating only what amounted to a scaled down, online Small Business Health Options Program (SHOP) that it put in place before the 2010 enactment of the federal Patient Protection and Affordable Care Act.  Utah’s Avenue H wouldn’t have met federal exchange requirements, primarily because it didn’t offer plans for individuals.  The likely outcome would have been disapproval of Utah’s state-based exchange status and the feds taking over Utah’s exchange.

Under the terms of an agreement between the state and the federal government reported today by The Salt Lake Tribune, the feds will run the Utah’s individual exchange marketplace while the state will operate Avenue H as a state-run SHOP exchange.  Avenue H will operate “without a competing SHOP exchange or interjection by the federal government” Gov. Gary R. Herbert wrote in a May 9, 2013 letter to U.S. Health and Human Services Secretary Kathleen Sebelius conveying his understanding of the deal.

The newspaper notes if the deal is approved as expected this week, Utah would be the only state exchange operating under such an arrangement:

The agreement is unique to Utah and essentially opens up a fourth alternative for operating the federally-mandated exchanges. Previously states had only three choices — a state-run exchange, a federally-run one, or a state-federal partnership exchange

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California measure that would deter self-insurance of medical risk by small employers advances

To insure or self-insure?  That’s the policy question underlying pending California legislation that passed its first committee test this week.  SB 161 is designed to reduce the incentive for small employers to self-insure their workforces for medical costs by making it less feasible for these employers to limit their losses once they reach a certain point.  Supporters of the bill maintain it’s needed to give the state health benefit exchange’s Small Business Health Options Program (SHOP) the opportunity to bring down insurance rates by aggregating small employers’ purchasing power into a single buying mechanism starting in 2014.  Click here for an analysis of the measure prepared by the Senate Health Committee, which passed out the bill May 2.  A similar bill stalled in 2012.

Self-insurance arose as a solution for small employers beleaguered by rising small group insurance premiums over the past decade.  But self-insuring medical risk is a high risk proposition for small employer since unlike large employers, they are unable to spread the risk of a large claim over a sizable group of employees.  That’s why it’s a no go for small employers without “stop loss” coverage to kick in when an individual employee’s or all employees as a group incur losses in a policy year exceeding a set amount.  SB 161 would bar stop loss coverage from protecting a small employer until an individual employee incurred medical bills of $65,000 or those of the entire workforce reach dollar amounts specified in the bill.

Opponents of the bill argue that the market should determine which approach works best for small employers: self-insurance or insurance.  Other issues cause consternation among supporters of the measure.  Only larger small employers are likely to consider self-insurance given the inherent risk that favors size.  That could leave the SHOP with the low end of the small group segment – employers having less than 20 to 30 employees.  This could reduce the SHOP’s market power with health plan issuers since there would potentially be fewer “covered lives” and larger employers to bring to the bargaining table.  (In California, the small group market is employers with 50 or fewer employees.)

Apparently concerned about stop loss coverage’s potential to undermine the SHOP exchange marketplace, the U.S. Department of Health and Human Services issued a proposed rule April 5, 2013 barring entities with relationships to issuers of stop loss insurance, including those who are compensated directly or indirectly by issuers of stop loss insurance, from serving as exchange navigators.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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