The Affordable Care Act (ACA) designed the Small Business Health Options Program (SHOP Marketplace) to provide small businesses with more choices for their healthcare plan. The roll-out of the SHOP Marketplace, however, has faced its share of obstacles, changes, and delays. The SHOP Marketplace still isn’t working for small businesses.
The Robert Wood Johnson Foundation (RWJF) recently published a report outlining factors that have lead to the low enrollment rates in the SHOP Marketplace programs.
The analysis is based on case study interviews with insiders (brokers, agents, small business representatives, and application assisters) in eight states, including: Colorado, Illinois, Maryland, Minnesota, New Mexico, New York, Oregon, and Rhode Island.
4 Reasons the SHOP Marketplace Isn’t Working for Small Businesses
According to RWJF’s analysis, there are four major barriers to SHOP enrollment.
1. Delays with the SHOP Program
There have been several delays in the implementation of SHOP Marketplace program and its features, including:
The “Employee Choice” feature that offers employees a menu of plans to choose from was delayed in the 33 states who used a federally-run SHOP Marketplace in 2014. Small businesses in these states were limited to offering a single plan through federally-run SHOP Marketplaces.
18 of the 32 states using a federally-run SHOP Marketplace opted out of the “Employees Choice” feature in 2015, limiting the healthcare plan choices for small businesses again in 2015.
During the first open enrollment period, online enrollment was delayed (see below).
2. Limited Reach of Small Employer Tax Credits
Although the small employer tax credit sounds appealing, according to RWJF’s analysis, the small employer tax credit “has shown itself to be largely irrelevant (with isolated exceptions).”
The eligibility requirements for the small employer health insurance tax credits can be quite stringent and specific. The credit is only available to employers with less than 25 full-time equivalent (FTE) employees who pay their employees an average wage of less than $50,000 per employee annually.
In addition, the credit is only available for no more than two consecutive years. The report points out that “Because of the narrow targeting of the credit and the phase-out schedule, few employers are eligible for sizable credits.”
3. Low Number of Brokers/Agents Steering Their Clients to SHOP Plans
To become a new certified agent, agents and brokers must successfully complete the annual Centers for Medicare and Medicaid Services (CMS) training program. The low number of brokers steering their clients to SHOP plans was partly due to insufficient training opportunities.
According to the analysis by RWJF, “Brokers frequently felt that the training did not prepare them sufficiently for using the SHOP interface, sometimes adding to the time necessary to enroll a client because the broker had to work through the website with little to no understanding of the system.”
4. IT Problems with the SHOP Program
Shortly before open enrollment last year, the Department of Health and Human Services (HHS) announced that online enrollment for the federally-run Small Business SHOP Marketplace would be delayed until November 2014. Small businesses wanting small group health coverage through the SHOP had to enroll via paper applications through a certified health insurance producer.
As RWJF’s analysis points out, “in some cases, the IT problems were sufficiently serious that they all but prohibited enrollment.” Enrollees in Maryland and Oregon could not enroll online; SHOP plans could only be obtained through a broker without any employee choice options.
Source: Robert Wood Johnson Foundation
Additional Issues with the SHOP Marketplace
In addition to the issues outlined by RWJF, there are three core issues with the SHOP Marketplaces. Small businesses hoped the SHOP Marketplaces would help them offer affordable health benefits that employees value. But instead:
Competition is low in the SHOP exchanges (i.e. in most states there is still little choice for employees, and little competition to drive costs down).
Premiums cost more in the SHOP Marketplaces than on the individual health insurance market (i.e. the premiums are still cost prohibitive for most small businesses).
Premium subsidies are only available in the individual exchanges (i.e. providing further cost incentive to send employees to the individual market).
Because of the core issues with the SHOP Marketplace, and the new opportunities on the individual health insurance market, many small businesses are passing up the SHOP in favor of individual health insurance. Since employers with under 50 FTE employees are not subject to the employer mandate, most small businesses are seeing the advantages of individual health insurance and allowing employees to select their own health plan from the Individual Health Insurance Marketplace.
To continue offering a competitive health benefit, small businesses are implementing a premium reimbursement plan to reimburse employees for their individual health insurance premiums. In a recent Whitepaper we predict that 60 percent of small businesses will eliminate traditional employer-sponsored health insurance in favor of an employer contribution to individual health plans by 2017.
Have you noticed the trend of small businesses skipping the SHOP in favor of individual health insurance and premium reimbursement? Leave a comment below.