Implementation of Small Business Exchanges in Six States

Implementation of Small Business Exchanges in Six States Linda J. Blumberg and Shanna RifkinJune 2013ACA Implementation—Monitoring and Tracking Implementation of Small Business Exchanges in Six States2INTRODUCTIONThe Affordable Care Act (ACA) introduces insurance exchanges as a tool to provide structure and oversight to the nongroup and small group insurance markets. Lacking the purchasing power of large employer groups, having fewer individuals over whom to spread health care risk, and facing higher per enrollee administrative costs, small employer groups often face higher premium rates and fewer health insurance options than do large groups. The Small Business Health Options Program, or the SHOP exchange, is intended to provide administrative relief as well as affordable coverage options to small businesses across the country. While both the federally facilitated exchanges (FFEs) as well as the state based exchanges (SBEs) will have a SHOP exchange, this paper focuses on SHOP development in six SBEs: New York, Oregon, Rhode Island, Colorado, Maryland, and New Mexico.2 As our findings will show, there is much variation across the states with regards to the development and implementation of the SHOP exchanges. These six states may not be representative of all SBEs, however. This paper begins by providing an overview of the functions of the SHOP as intended by the ACA and discusses recently issued rules that affect the future and viability of the SHOP exchanges. We then delineate the available policy options for states implementing a SHOP exchange and thereafter provide an in-depth discussion of the policy options selected by the studied states. As the SHOP is targeted towards small businesses, the small business perspective and state efforts to educate employer groups about the SHOP exchanges are discussed as well. We conclude by outlining challenges to effective SHOP development and long-term maintenance of the SHOP exchanges. Major Findings • Policy decision-making varied state to state and appears to be rooted in specific market dynamics that exist in each individual state. For example, smaller states like Rhode Island can expect greater uniformity in SHOP participation across insurance carriers (from here forward referred to as “carriers”) and brokers, while larger states like New York will incorporate more flexibility to account for market dynamics that differ across the various regions in the state; • Brokers and agents remain a key aspect of the small group market and will be a key partner in maximizing SHOP enrollment; • Regardless of the federal decision to delay implementation of employee choice, all studied SBE states seem likely to include some version of an employee choice model in their SHOP exchanges beginning in 2014; • Carrier interest appears high, although in most states this interest is currently indicated by nonbinding letters of intent. The number of plans that actually commit to the SHOP exchange may decline once each state has finalized its requirements for SHOP qualified health plans; With support from the Robert Wood Johnson Foundation (RWJF), the Urban Institute is undertaking a comprehensive monitoring and tracking project to examine the implementation and effects of the Patient Protection and Affordable Care Act (ACA) of 2010. The project began in May 2011 and will take place over several years. The Urban Institute will document changes to the implementation of national health reform in Alabama, Colorado, Maryland, Michigan, Minnesota, New Mexico, New York, Oregon, Rhode Island and Virginia to help states, researchers and policy-makers learn from the process as it unfolds. This report is one of a series of papers focusing on particular implementation issues in these case study states.1 In addition, state-specific reports on case study states can be found at www.rwjf.org and www.healthpolicycenter.org. The quantitative component of the project is producing analyses of the effects of the ACA on coverage, health expenditures, affordability, access and premiums in the states and nationally. For more information about the Robert Wood Johnson Foundation’s work on coverage, visit www.rwjf.org/coverage.Of six states analyzed, all intend to offer employee choice through their small business exchanges, report strong interest from carriers, and do not anticipate upheaval among brokers. Implementation of Small Business Exchanges in Six States3SMALL BUSINESS HEALTH OPTIONS PROGRAM: AN OVERVIEW OF FEDERAL RULES AND GUIDELINES The Affordable Care Act requires each state operating an individual exchange to also operate a SHOP exchange, offering small employer groups the opportunity to provide their employees comprehensive health insurance coverage that meets federal and state requirements for qualified health plans. The final exchange rules issued in July 2012 recognize that while significant overlap exists between the functions of a non-group exchange and a SHOP exchange, the SHOP exchange h