The U.S. Supreme Court’s decision in June to uphold the Affordable Care Act briefly tempered some of the political brouhaha surrounding the new health care law. But partisan rhetoric flared again during election season, creating more confusion about the law than clarity. Many small-business owners trying to prepare their companies for changes to the health care system are left slogging through a mountain of misinformation and competing opinions when all they really want to know is, “What does this mean for me?”
The health care law is extensive, complex and affects small-business owners in myriad ways. In 2014, the bulk of the law’s provisions go into effect. Small businesses will be impacted differently depending on a variety of factors, including size and average wages. For instance, small businesses with fewer than 50 employees are not required to provide insurance to their employees. This is a crucial fact about the law that most small-business owners don’t know. And that’s one of the law’s most straightforward provisions. It’s no wonder more complex elements — such as the vitally important small-business health insurance exchanges — aren’t on business owners’ radar.
California is moving quickly to set up its small-business exchange, called the Small Business Health Options Program (SHOP), so it’s important for small-business owners to cut through the political rhetoric and learn the facts.
A NEW CHOICE FOR SMALL BUSINESS
Before the reform law’s enactment, our nation’s health coverage market was financially unsustainable, particularly for small-business owners. Lack of affordability is the main reason small-business owners don’t offer health coverage to employees. It’s not that they don’t want to provide it; we know from our opinion polling that they do. But, unlike big businesses, small firms face premium rates that rise unpredictably.
The exchange is the most important component of health care reform for small businesses. These marketplaces will allow small businesses to band together to purchase insurance, giving them the kind of purchasing clout large companies currently enjoy and lowering costs.
Sacramento small-business owner Griselda Barajas, owner of Griselda’s Catering in Sacramento, has provided health benefits to her 10 employees for more than 15 years. However, the skyrocketing costs have made it more and more difficult.
“It hasn’t been easy, and it’s a major commitment and responsibility. But it’s something my employees really appreciate, and it creates loyalty,” she says. “I’m very grateful to be able to provide it, and it’s not something we take for granted but I can’t drive my prices up to cover the rising costs — especially now, since we have to be even more sensitive to people’s budgets.”
In California, Barajas’ small business is in the minority of those that can offer benefits. A recent opinion poll conducted by Field Research for Small Business Majority and Kaiser Permanente found only 32 percent of small businesses offer health insurance to their employees. However, when small-business owners understand that California’s exchange opens in 2014, allowing them to shop for health insurance among competing companies, the proportion likely to offer health coverage jumps to 44 percent.
A recent opinion poll found only 32 percent of small businesses currently offer health insurance to their employees.
While Barajas is one of the few who already offers insurance to her employees, the idea of an exchange that could help lower her prices and make it easier to administer benefits is appealing.
“I’m optimistic,” Barajas says. “I will definitely look into it. I have to in order to be able to continue to provide insurance.”
SHOP’s governing body, the California Health Benefit Exchange Board, has been working since 2011 to make sure it’s ready for Barajas and the roughly 700,000 small businesses with 50 or fewer employees who will be eligible to join on Jan. 1, 2014, when the law requires states to open their exchanges to the public.
In September 2010, California passed legislation creating the framework for the nation’s first exchange. At that time, legislators decided critical issues, such as who would govern the exchange, the role of the exchange as an active purchaser, and the division of the exchange into two pools for individuals and small businesses. Small businesses in California get their own exchange, and individuals will use a separate exchange, the Individual Exchange.
The Exchange Board has been meeting approximately once a month since then to iron out all the other details. They have been aggressively seeking input on a host of issues and made major decisions at their August meeting that will significantly affect small businesses.
WHAT THE SHOP WILL PROVIDE FOR SMALL BUSINESS
The exchange will be an online marketplace where small businesses can compare plans with various prices and benefits — not unlike airplane or hotel booking websites. But purchasing insurance is a bit more complex than booking a flight to Vegas.
The Exchange Board’s decisions provide some much-needed clarity for small-business owners:
• Insurers selling plans in the Individual Exchange will, under most circumstances, be required to sell in the SHOP. This means the SHOP will have more carriers, providing small businesses with more choices, more competition, better pricing and other benefits.
• Benefits in the SHOP will closely align with what is offered on the individual side. This will allow consistency for workers who may jump between job-based coverage and individual coverage. It also means workers could leave their job and buy a similar plan on the Individual Exchange.
• Brokers will be allowed to sell SHOP coverage. The exchange will pay brokers directly, and their commissions will be matched to the outside market. This is hugely important, as small businesses rely on brokers to provide expertise on the insurance industry. An exchange that excluded brokers would simply not be as successful or effective as one that includes them.
• The SHOP will offer additional human resource services — something small-business owners have asked for. In fact, our polling found that small-business owners are not only hoping the SHOP exchange will lower prices, but also for it to help reduce the administrative burden of providing health insurance.
• Currently, the Exchange Board is exploring options for COBRA, 125 plans, Flexible Spending Accounts and Health Savings Accounts. Once they get more information and feedback on these options, the board will decide exactly which services the SHOP should offer. The board also decided to select a third-party vendor to handle most administrative functions of the SHOP (payment collection, IT support, etc.) so the small-business customers don’t have to.
In addition to these key decisions, the Exchange Board determined the SHOP will sell stand-alone dental and vision plans, wellness incentives will be allowed and it will standardize plan designs — allowing for a true apples-to-apples comparison when shopping for coverage.
These decisions are hugely important for small-business owners like Barajas, who acknowledges that while she’s interested in the exchange, she doesn’t know much about it.
“There are still a lot of unknowns,” she says. “But I’m really trying to inform myself, because it’s so important to keep up with it.”
Another decision the Exchange Board made is that pre-enrollment begins in October 2013. That means Barajas and thousands of other small-business owners have a year to learn about this new insurance marketplace.
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