A key small-business friendly component of the Affordable Care Act won’t go into effect as soon as planned. The Act, passed in 2010, stipulated that Small Business Health Options Programs would establish group health insurance exchanges for small employers in each state. The so-called SHOPs would, beginning in January 2014, offer employees of those businesses a choice of coverage options.
The idea was to streamline the administrative process for small employers, enable groups of them to access the rates that large employers enjoy, and let employees shop around, presumably driving down costs by forcing greater competition among insurance providers.
But on March 11, the Health and Human Services Department proposed an amendment to the Affordable Care Act that delays by a year the offer of a choice of health insurance providers to employees:
“The effective date of the employer choice requirements ... and the premium aggregation requirements ... for both State-based SHOPs and FF-SHOPs will be January 1, 2015; (2) State-based SHOPs could elect to offer employee choice and perform premium aggregation for plan years beginning before January 1, 2015, but need not do so; and (3) FF-SHOPs will begin to offer employee choice and premium aggregation in plan years beginning on or after January 1, 2015.”
In other words, employers in those states with exchanges operated by HHS will offer a single qualified health plan to employees starting in 2014. States that have opted to run their own exchanges may also choose to delay their programs.
The New York Times yesterday reported that “in recent weeks, insurance companies urged the administration to delay the employee choice option.”
Another explanation for the delay is that the Federal Government was unprepared for the number of exchanges it would be managing. The Affordable Care Act incentivized states to set up their own exchanges, but if they declined, then individuals and employers would access federal government-run exchanges. Governors of 26 states opted for the latter path. Another 7 states will partner with the Federal government to operate exchanges.
Mike Mayeux, founder and CEO of Novotus, a recruitment process outsourcing provider that works with companies of all sizes around the nation, says the announcement extends uncertainty for small business owners. "Companies are sitting on cash, not hiring unless they have to, and waiting for direction in so many regulatory issues, especially around healthcare reform," Mayeux says. "While I applaud the realization that the reform process has been overwhelming ... Business needs a settled future where planning and investments can be analyzed and initiated. What we are getting instead is a continued unsettled landscape, which will continue the economic uncertainly that results."
To be sure, exchanges for individual consumers are still set to open for enrollment this year with coverage kicking in next year.
According to a PwC Health Research Institute 2012 report titled Health Insurance Exchanges: Long on options, short on time, “Total exchange membership in 2021 is projected to reach 29 million—25 million in the individual exchange and 4 million in the small group exchange.” And HHS has estimated that the health care reform act exempts all but about 4 percent of small businesses from offering health insurance.
One might wonder why the much larger individual exchanges are not suffering the same setback as exchanges especially for small business. Could it be that all the talk about small-business friendly health care reform was just more of what small business owners have come to expect from politicians: long on promises, short on follow-through?