Multiple choice proved to be too difficult for the Obamacare health exchanges -- at least for now. The Small Business Health Options Program, or SHOP, national online insurance marketplace included in Obamacare was scheduled to be fully up and running in October of this year. However, the Obama administration recently announced that these online exchanges won't operate as intended until 2015 due to "operational challenges."
Small businesses will only be able to select one insurance plan for their employers instead of a wide array of offerings as originally promised. Who are the winners and losers with this delay? The answers might be surprising.
1. Technology contractors
Technology companies involved in building the federally operated insurance exchanges could perhaps unfairly receive a black eye as a result of the schedule change. The Wall Street Journal quoted Bob Graboyes with the National Federation of Independent Business as saying that "the information-technology needs required to get these up and running are staggering." Graboyes added that the enormity of the task was underestimated.
Some don't blame technology vendors such as CGI Group (GIB 3.92%) a major contractor for the delayed federally operated system. Insurance companies suggest that the administration itself is partly at fault because details on the exchanges weren't provided until last month, according to The New York Times.
2. Small employers and their employees
Small businesses lose with the delay because they're stuck with only one insurance option to offer their employees. The promised ability to be able to lower insurance costs for these small companies through multiple insurance plans available on the exchanges was important for some small employers who initially supported Obamacare.
With the delay, some small businesses could choose to drop coverage for their employees and pay fines instead. While that could be the more attractive choice financially, the companies still lose. Aside from having to pay the fines, the employers would also forego tax benefits from providing health insurance benefits.
Unfortunately, employees of small businesses could be losers under any scenario. If their employer sticks with the one plan offered next year, they potentially miss out on lower insurance premiums. If their employer drops coverage altogether, employees could pay more out of their own pockets for insurance even with federal subsidies.
3. Insurance companies
Insurers win from the delay by gaining more time to determine how to work with the exchanges. Aetna (AET) reportedly sent a letter to the Obama administration in December referencing the logistical problems with the Massachusetts health exchange on which Obamacare was partially based.
The reaction to the online marketplaces from some large insurers has been less than enthusiastic. UnitedHealth Group (UNH 1.38%) CEO Stephen Hemsley indicated that his company would move forward somewhat cautiously. WellPoint (ANTM 0.40%) also stated that it would only participate in 14 state exchanges initially.
4. Uncle Sam
Despite the potential embarrassment to the Obama administration resulting from the online marketplace delay, the federal government could actually be the biggest winner. Why? Follow the money.
The lack of multiple insurance plan choices seems likely to spur many small employers to pay the fines imposed by Obamacare rather than provide more costly health coverage. This means that the government gets more money in three ways. The most obvious is the added revenue from the fines. The government will also receive more taxes from small businesses because the dollars that they previously spent on employee insurance were tax-deductible. That won't be the case if the companies forego providing health coverage.
Finally, suppose many employers that drop coverage give back some of the money to employees after the fines are paid. The increased money returned to the employees will be taxable. A win for the feds.
The national delay also enables state-operated exchanges to move back their schedules also. However, some states will move ahead on schedule with multiple insurance choices on their health exchanges. Small businesses in California and Connecticut and perhaps a few other states could be winners if these exchanges work as intended.