The bell is tolling for many small businesses that received a reprieve from instituting the Affordable Care Act last year. The delay in requiring businesses to offer employees healthcare coverage or face penalties ends at the end of this year for employers with more than 50 employees. That means that businesses of all sizes are going to be actively looking for insurance solutions during the next few months.
That's bad news for big employers choosing not to offer healthcare insurance and facing penalties, but it may prove to be good news for some small businesses and their workers. That's because small businesses in 32 states will be able to shop for health care insurance plans on the federal small business health insurance exchange this fall.
This exchange will allow businesses with fewer than 50 employees to compare and select plans from insurers such as UnitedHealth Group and WellPoint. It will also allow employees in 14 states the ability to select the insurance coverage they want from a menu of employer-selected options.
According to the Centers for Medicare and Medicaid Services, or CMS, this new small business health insurance exchange will go live in November; but given launch headaches suffered by healthcare.gov last year, five states will get early access to make sure everything goes off without a hitch. Small businesses in Missouri, Illinois, Ohio, New Jersey, and Delaware will all get access to the Small Business Health Options Program, or SHOP, in late October, ahead of the Nov. 15 start of open enrollment.
Source: Department of Health and Human Services
Sneaking a peak
While some small businesses may have already selected healthcare insurance plans for employees through brokers last year, many will likely turn to the newly created exchange to compare products and prices. That's because a provision of the Affordable Care Act may provide tax credits that could be worth up to as much as 50% of the cost of premiums on plans offered through the small business insurance exchange to small businesses with fewer than 25 employees.
Uneven ground
Small businesses visiting SHOP will have varying experiences from state to state. That's because earlier this year, the CMS offered state insurance commissioners an opportunity to request a delay extension to the employee-choice aspect of SHOP if the state believed implementing that provision would significantly increase prices for small business owners.
18 of the 32 states relying on the federal SHOP took the CMS up on its offer and that means that employees in just 14 states will get the benefit of employee choice.
Source: Department of Health and Human Services
Source: The Architect of the Capitol Flickr
It may not be as bad as it sounds
Small businesses participating in the federally run small business exchange may sound a bit too big-brotherish to some, but there could be a potential silver lining for these small employers, employees, and insurers.
Many people worried that the individual health insurance exchange would have too few options, too many pricey plans, and little interest. But many of those worries have since disappeared.
The same could prove true for SHOP. Concerns that plan pricing will climb significantly because of an insurer's inability to adequately price for patient mix, for example, may not play out as feared.
And small businesses may find that SHOP helps close the gap between the prices they pay and the prices paid by big businesses. According to a 2006 study conducted by the Commonwealth Fund, the same insurance policy costs a small business owner 18% more than it costs a large business owner. Since the SHOP is a competitive marketplace, small businesses could see that spread shrink.
Fool-worthy final thoughts
The SHOP exchange gives employers with less than 50 workers the ability to compare health insurance options this year and employers with less than 100 workers the chance to use the exchange next year. Whether or not plan pricing expands significantly will depend, at least in part, on how many healthy young members sign up for coverage.
Regardless, since as many as 50% of small business owners are uninsured and, according to the National Federation of Independent Business, 64% of employers with fewer than 50 employees offer workers healthcare insurance, there would appear to be an opportunity to significantly reduce the number of un- and under-insured people through the exchange.
