Terry Gardiner and Isabel Perera have put out a new report laying out a road map for states, policymakers, health reform advocates, and small-business leaders in implementing the rarely discussed, but important SHOP Exchanges — the Affordable Care Act’s health insurance marketplace that will provide an array of health insurance plans for small businesses and their employees in 2014. Under the health care law, states may avoid SHOPs altogether and establish a single exchange that serves both individuals and small employers, but are required to enact some kind of insurance marketplace by 2014 or turn it over to the federal government.
Beyond a few broad requirements, however, states have significant flexibility in implementing SHOPs, leading Gardiner and Perara to examine the key decisions states will have to make to ensure that the business exchanges provide high-quality, low-cost health insurance “that compares favorably to insurance offered in the outside market”:
– Type of purchaser: Exchanges that follow the active purchasing model choose high-value plans to meet the specific needs of small employers and their employees, while those that act as passive purchasers try to maximize plan options by allowing any qualified carrier to participate.
– Role of brokers: Brokers are more useful in the small group exchange than the individual exchange, since the needs of small employers are greater than that of individual purchasers. Employers rarely employ insurance experts to weed through the intricacies of comparing different policies.
– Structure: States can merge the individual and small-group pools and form one exchange, separate the two pools and form two exchanges, or separate the two pools and administer them under one exchange. States should consider demographics, projected pool sizes, the spread of risk, administrative expenses, and premium rate impact in all markets before reaching their decisions.
– Choice: Small employers who offer health coverage typically select their employees’ plan. Only larger employers are able to offer multiple insurance plans to their employees. The state will have to decide how the exchange should act.
– Additional services: Exchanges may provide a variety of administrative services that can help small businesses cope with the administrative work of providing health benefits and address their other human resources needs.
The report also offers this table of real world experiences that can guide state decision making:
Read the full report here.