No Small Matter Setting Up Small Business Exchanges

Abstract

From the Editor-In-Chief Health AffairsVol. 31, No. 2: The Future Of The Small Business Insurance Exchanges No Small Matter Setting Up Small Business ExchangesSusan DentzerPUBLISHED:February 2012Free Accesshttps://doi.org/10.1377/hlthaff.2012.0056AboutSectionsView PDFPermissions ShareShare onFacebookTwitterLinked InRedditEmail ToolsAdd to favoritesDownload CitationsTrack CitationsPermissionsDownload Exhibits TOPICSMarketsSmall Business Health Options Program exchangesAffordable Care ActHealth insurance exchangesOrganization of careTo say we’re in the “implementation” phase of health reform may suggest something simple—as if we’ve purchased a product with “some assembly required” and now just have to take it home and set it up. In fact, as far as a good part of the Affordable Care Act is concerned, implementation is more analogous to having been handed a few cryptic specifications for a product of uncertain functionality that end in the words “Build this.” That’s the fundamental impression many may have after reading this month’s Health Affairs , with its cluster of articles on the law’s small business insurance exchanges, produced with support from the Commonwealth Fund and organized by Tim Jost. These insurance stores for the small-group market also sound simple in concept, but as Jost’s and other articles in the cluster make clear, they are anything but. Reason For BeingOur exploration of the complexities begins with this question: What were lawmakers thinking when they devised the so-called Small Business Health Options Program (SHOP)? As Jon Kingsdale notes, there was a fundamental rationale for the reform law’s individual exchanges, in that the risks that any one person could incur very high health costs could now be spread across a far larger group. But no equivalent rationale existed for the SHOP exchanges; the private sector was already handling the job of pricing risk in the small-group market and distributing insurance products reasonably well.The main justification for creating the exchanges, writes Kingsdale, seems to have been to give small businesses more choices in coverage. But the desire for choice appears to be well down on small employers’ list of priorities after their most urgent concern: cost.Better And Cheaper?As such, the main test for the small business exchanges will be whether they can deliver cheaper coverage than the market produces now. (Kingsdale offers some ideas, such as licensing existing Medicaid managed care plans to sell coverage to small businesses through the exchanges.) What’s more, as Terry Gardiner observes, if exchanges don’t deliver administrative efficiencies that make small business owners’ lives easier, the exchanges “could have minimal impact or even fail.”From these clear points of departure, various articles detail the other challenges confronting policy makers. A basic choice that the reform law left for states is whether or not to combine the small business and individual exchanges into a single exchange. An Urban Institute simulation described by Fredric Blavin and colleagues suggests that there would be benefits to doing so: An estimated one million more would gain coverage through greater affordability.Then come the daunting logistical matters, as William Kramer observes: “establishing the information technology and organizational infrastructure to manage eligibility determination, enrollment, premium billing and processing, consumer choice tools, interfaces with health plans and employers, and customer service.”Market ImpactExecuting all of this would be difficult enough were the exchanges to be the whole of the market—but of course they won’t be. For complicated reasons described in the articles, there will be abundant opportunities for adverse selection, both within exchanges and between exchange products and the external market. New private exchanges are popping up, and although they seem mainly geared to larger employers, their long-term impact on the marketplace isn’t clear.As of 2017, moreover, states can allow companies with more than 100 workers to purchase coverage through the SHOP exchanges, which could encourage larger employers to move to defined-contribution models and send workers to the exchanges to buy coverage. To state the obvious, there’s no consensus in this country as to whether the likely shrinkage of employer-sponsored coverage that would probably result would be a desirable outcome.As Jonathan Weiner and colleagues note, “These are complex issues, and January 1, 2014”—when the exchanges are to be up and running—“is no longer very far in the future.” And lest we forget it, Ted Goldman’s Report From The Field reminds us that the backdrop to these technical puzzles is highly partisan politics. His absorbing account tells how Colorado managed to pass a law to set up exchanges as business groups faced down the local Tea Party—and despite the state attorney general’s participation in the multistate lawsuit to overturn the Affordable Care Act.We sincerely thank the Commonwealth Fund for its support of this timely and provocative cluster. Loading Comments... Please enable JavaScript to view the comments powered by Disqus. DetailsExhibitsReferencesRelated Article Metrics History Published online 1 February 2012 Information Project HOPE—The People-to-People Health Foundation, Inc. PDF download