There’s a provision tucked into a recently proposed federal rule that could effectively destroy the Affordable Care Act-created health insurance marketplaces for small businesses, called the “SHOPs”. The SHOPs have been the forgotten stepchild of the ACA; media and policy attention has primarily focused on the rocky roll out of the individual marketplaces, the huge expansion in coverage, and recent trends in premiums and insurer participation. The fact that the SHOPs are dying a slow death has attracted little notice. The final nail in the coffin may be in this draft federal rule.
Remind me – What are the SHOPs again?
Congress created the Small Business Health Options Program (hence, SHOP) in the ACA as markets for small businesses to shop for health insurance. In an attempt to respond to small business owners’ inability to give employees a choice of plans, SHOPs must provide an “employee choice” option whereby employers can set a contribution level and let each employee select his or her preferred option from a range of plans. In addition, small employers eligible for the ACA’s small business premium tax credit must enroll through the SHOP in order to access it.
What is the status of SHOPs today?
The SHOPs, both state- and federally run, have had a rocky roll out. Most were not online in the first year, and even in 2016 five states still do not offer an online portal. Enrollment has generally been low. In the state-run SHOPs enrollment is a small fraction of total small group market enrollment. Federal officials have not released state-specific data, but there’s no reason to believe their enrollment is any more robust than in the state-run SHOPs. Some state officials have questioned whether the costs of running the SHOP outweigh the benefits it provides to employers.
What are the feds doing about the SHOPs?
In their proposed rule, the feds appear ready to wash their hands of the program. To kill it outright would take an act of Congress – running a SHOP in every state is a requirement of the ACA. But the proposed rule effectively guts the SHOPs by rescinding an earlier requirement that major insurers participate. Specifically, if an insurer has at least 20 percent of the small group market within a state, the FFM will only certify them for participation in the individual market if they also agree to participate in the SHOP. This so-called “tying” requirement has primarily affected Blue Cross Blue Shield plans, which have long dominated the small group market in many states. As a result, in a number of FFM-SHOPs, Blue Cross Blue Shield is the only insurer participating.
For 2018, the Obama administration is considering eliminating this requirement, largely because of concerns that it is discouraging insurers from participating in the individual marketplaces. It is likely that many insurers are only participating in the SHOP because of the tying requirement; in its absence some FFM-SHOPs may lose all participating insurers. Without enrollment data for the FFM-SHOPs it is hard to know how many employers would either lose their SHOP plan or ability to access the small business premium tax credits (the latter being of somewhat limited value; it is only available for two consecutive tax years and many employers have found the application process more trouble than it is worth).
The administration’s proposal is not yet final, but my crystal ball tells me the tying requirement will be gone in 2018. And in many states, the SHOPs will go with it.