Alongside the more publicized individual public health insurance exchanges, a relatively new public marketplace for small business health insurance offers another choice to employers.
Federal and state Small Business Health Options Program marketplaces opened since the fall are developing slowly, but the SHOP exchanges show great promise to transform small employer health insurance, according to carriers, state officials, and a Commonwealth Fund study.
Seventeen states and the District of Columbia have opened SHOP exchanges since October, with the federal government operating the small business marketplaces in the remaining states. The performance of the SHOP exchanges varies from state to state, and none of the federally operated exchanges have automated billing or administration, says Sarah Dash, one of the authors of the Commonwealth Fund study and a research fellow at the Georgetown University Health Policy Institute in Washington.
"Basically, there's still a small business market outside the SHOP," she said in interview Friday. "There are still a lot of things in play in terms of enrollment."
Dash says several factors are depressing SHOP exchange enrollment levels, including the federal government's decision to allow renewals of small business health insurance policies through fall 2016, even if they do not comply with the PPACA. "Early renewal takes a whole chunk out of the market that could have entered the SHOP," she said. "They are taking a big customer base out of the SHOPs."
The SHOP exchanges have rolling enrollment, which has eroded employer urgency to join the new market, Dash said. "They have a rolling ability to enroll, so there's not been this rush to a deadline like March 31 [on the individual public exchanges]…We're really just at the beginning."
'Two-Fold Value Proposition'
Jim Sugden, small business marketplace manager at Connect for Health Colorado, says he is optimistic about the long-term prospects of the SHOP exchange in the Centennial State. "We are finding our way along. We are off to a slow start, but it's a new concept," Sugden said in an interview.
The Colorado exchange official said the SHOP exchanges offer a level of choice to employers and their employees which has been elusive in the past. "Our value proposition is two-fold," Sugden said, noting a small percentage of employers are eligible for a small business tax credit. "A larger number of employers will find the larger choice more attractive… I know this can work because choice is a winner if you present it properly. You have to frame the choice in terms of being meaningful for the employees."
Connect for Health Colorado, described as a quasi-public entity by its CFO, Cammie Blais, offers 96 plan designs from six carriers on its SHOP exchange. As of March 1, there were 176 groups enrolled, with about 1,600 individuals either receiving or slated to receive benefits, Sugden said.
The Colorado SHOP exchange should be able to seize a significant share of the state's small business health insurance market, he believes. "I'd really like to see us have 25 to 30 percent of the market," Sugden said, adding the Colorado SHOP exchange could be "financially sustainable" as early as January 2016. "If you look at a business plan for most businesses, you get three, four, or five years to be sustainable."
Dash says the SHOP exchanges have the potential to help the country achieve a value-based healthcare system. "The idea is you aggregate the purchasing power of your individuals and your small businesses," she said. "Big businesses can drive value-based initiatives. They can kind of drive the marketplace more [than smaller players]… The idea behind the marketplaces is as an aggregator and setter of standards. That's the promise as far as the value-based delivery system is concerned."
Rhode Island on a Roll
While the Commonwealth Fund study does not gauge SHOP exchange performance, it does indicate "which ones are working and which ones aren't working," Dash said, noting the states are leading the charge.
"The states that did move forward with establishing their own SHOPs really tried to make this a value-add for small businesses," she said. "Federally run SHOPs just don't have the level of choice. Employers in those states don't have the options that are available in other states."
Several states offer health insurance policies on their SHOP exchanges that exceeded federal standards, according to Dash. She says seven states, including Rhode Island, offer the fullest possible range of plans.
"Our SHOP exchange is one of the only SHOP exchanges in the nation that has been up and running since October 1," HealthSource RI officials said in a statement released Monday. "We've been pleased with the interest we've seen from Rhode Island's small employers, particularly around our unique Full Employee Choice model, which lets the employer select a base or reference plan at a designated contribution level and then gives employees the flexibility to choose from any of the 16 plans offered on our SHOP exchange. Employers appreciate having predictability in cost while still having the flexibility to let their employees choose what's best for them."
As part of their enrollment efforts, HealthSource RI officials said they are working to build partnerships with brokers. "We offer training for brokers and we work hard to let employers know that if they have a relationship with a broker they like and trust, they can continue to work with that broker to enroll through HealthSource RI."
Neighborhood Health Plan of Rhode Island is bullish on the small business insurance policies it is offering through HealthSource RI. "Some of the good SHOP exchange news in Rhode Island is that the site functions well, there have been no significant IT issues, and the experience for businesses and brokers of purchasing coverage in a new way has been positive. We anticipate these early and continuing HealthSource RI successes will build momentum and help grow our state's SHOP exchange over the coming months and year," said Tom Boucher, a spokesman for the health plan.
'Hard to be Definitive'
Brian Kim, senior vice president for account management at Southboro, Massachusetts-based ikaSystems, which is helping health plans operate on the new public exchanges, said it is too early to determine whether the SHOP exchanges are a small business health insurance game changer.
"For health plans, there remains enormous variability in potential outcomes and adoption rates," Kim said. "Flexibility remains the name of the game to be able to participate without over-committing, yet also without hamstringing efficiency and differentiation… The promise of SHOP is very attractive for small businesses, and it very well may be a significant shift for small and large businesses. At the same time, it is hard to be definitive."
According to Kim, three factors will determine the market impact of the SHOP exchanges:
- Uncertain market rates for plans available on the exchanges: Rates could mimic premium increases seen in the individual market due to benefit structure requirements; or volume and risk pooling could reduce overall premiums.
- The attractiveness of medical underwriting for certain industries with lower risk profiles and uncertainty about the negatively self-chosen market that remains.
- The evolution of private exchanges that may allow more medically underwritten rates at a group level.
"At the same time, much of the sensitivity to pricing and market rates is up to the employers and their perception of hiring and retention competitiveness," he said. "The impact of those considerations remains to be seen."
Christopher Cheney is the CMO editor at HealthLeaders.