Small Employers Exploring Health Care Exchange Options
Bagel-maker Matt Grove says he looks forward to seeing how health insurance exchanges, a key component of the Patient Protection and Affordable Care Act, can enhance the health care coverage he offers to his 20 employees.
"I'm hoping the exchanges allow me to offer more choice to my employees, because they range in age from their early 20s to their 50s and they all obviously have different medical needs," says Grove, owner of the Bagel Grove in Utica, New York. "Because of our size, I'm limited to one plan with two options, and depending on how the state sets up the exchanges—and I hope they will be designed to help small businesses—I may be able to have a different plan for every employee."
According to the U.S. Department of Health and Human Services, individuals and small employers will be able to purchase affordable health coverage through state-based Affordable Insurance Exchanges. States have until Jan. 1, 2014, to establish the exchanges, which many experts compare to online travel sites. However, they are significantly more complex—as the exchanges will manage enrollment, eligibility and multiple changes based on regulatory restrictions. If a state chooses not to establish an exchange, HHS will establish and operate one in that state.
To date, 13 states and the District of Columbia have established exchanges, 23 are studying their options, four are planning to begin the process, eight have taken no action, and two do not intend to create them, according to the not-for-profit Henry J. Kaiser Family Foundation, which provides information on health policy issues.
New York has a proposal in its state Senate. To gauge public opinion, HealthPass New York, a commercial health insurance provider for small employers, commissioned a survey of 300 small-business owners last November.
Based on that proposal, 84 percent of respondents said exchanges are a good idea, and 76 percent said they would consider using one when enrolling employees in a health care plan. Sixty percent of those who do not offer health insurance said they would be more likely to offer it through a health insurance exchange.
"I think for these exchanges to be successful and of benefit to employers, brokers need to be involved, because of the complexity of the rules around health care reform and the exchanges themselves," says Vince Ashton, president and CEO of HealthPass. "However, exchanges made sense for a lot of small businesses if done the right way because they allow them to offer more options to employees while simplifying the administration for the business."
The HealthPass survey showed that 56 percent of business owners that provide insurance agree they spend too much time looking for and providing benefits; 52 percent prefer to use a small-business exchange run by a private sector provider; and 45 percent prefer to purchase health plans online if that's an option. However, only 19 percent had prior familiarity with health insurance exchanges.
"Most businesspeople are pragmatists and they understand that for the most part now the law says certain things will happen," says Helen Darling, president and CEO of the National Business Group on Health in Washington, D.C., which represents more than 325 companies, including many of America's largest employers. "They may not support it, but they know they have to comply with regulations and are doing so."
Darling says her organization is helping its members prepare for regulations in a timely manner and is advising larger employers not to worry about the exchanges right now.
"We aren't sure if the larger employers will ever be involved with the exchanges; however, if they are, it won't be until 2017 or beyond."
Darling says that employers with a workforce of low-paid employees will be most affected by the exchanges.
"One provision of the PPACA concerns affordability, and low-paid employees may be eligible for a federal subsidy if they go out to the exchanges to obtain health insurance, and their out-of-pocket costs would dramatically decrease," she says. "Therefore, if most of your employees are low-wage earners, you might decide to pay the penalty and send them all to the exchange for coverage."
Darling says exchanges are a great opportunity for employers with fewer than 50 full-time employees who have to purchase health care insurance in an expensive market they have little control over. Those employers are exempted from the penalties if their members go to the exchanges.
"The biggest fear our employer members have is that they will be affected by multiple state exchanges, which could operate differently and therefore be difficult and expensive to navigate," Darling says.
Karen McLeese, vice president of employee benefit regulatory affairs for CBIZ Benefits & Insurance Services Inc. in Kansas City, Missouri, agrees.
"So much is unknown right now, and the outstanding question is what products will be offered through the exchanges compared to what's offered outside of them, state by state," she says. "And because each state has the power to define what are considered the 'essential benefits' to be offered by plans in and out of the exchange, it might force established plans to change."
McLeese says that employers with workers in multiple states would have to comply with the essential benefits definition in various states, noting that self-insured plans do not have to comply with the essential benefits rules and will have more discretion over their health care benefits.
"It's frustrating for employers because they want to plan, but are still waiting for the guidance," she says. "I suspect most employers will continue to differentiate themselves through the benefits packages they offer until their situation changes, if it does. My advice is to stay in tune with what's happening and find a trusted adviser so you don't get blindsided down the road."
The National Business Group on Health recently submitted a model for the exchanges to the Center for Consumer Information and Insurance Oversight, which is tasked with helping states establish insurance exchanges as required by the Affordable Care Act. The model underscores the need for the exchanges to aggressively focus on value, reduce the total cost of the coverage and care for all people and all payers, and improve the quality and safety of service for enrollees.
Darling thinks that at least two-thirds of employers will continue to provide health care benefits at least through 2017.
"It's essential for competing for talent and remaining competitive," she says. "I don't know of anyone saying we are definitely not providing benefits.
Lisa Beyer is a Workforce Management contributing editor. To comment, email firstname.lastname@example.org.