This memo was originally issued on April 4, 2013:
The Department of Health and Human Services’ proposal to delay critical requirements for small business health insurance exchanges in some states is a disappointment to Small Business Majority and millions of small businesses. It’s a letdown to small business owners and their employees looking forward to robust, competitive exchanges in 2014. We hope this proposal is recognized as counterproductive and is abandoned.
That said, there’s a tremendous amount of misinformation circulating about what the rule would actually mean. We want to set the record straight.
What the Rule Would Do
The proposed rule would delay two features of small business exchanges in some states until 2015. It would not delay opening of the exchanges themselves. Exchanges will still open Jan. 1, 2014.
The rule would mean that in some states, two features of the exchange won’t be implemented: 1) employee choice and 2) premium aggregation. These are wonky healthcare terms, but the impact their delay would have is fairly straightforward. Stalling employee choice means small employers will have to wait until 2015 to be able to offer workers an array of health plans to choose from. Delaying premium aggregation means an administrative function that would simplify the payment process for employers also won’t be available for a year. The two features are linked—premium aggregation is not needed without employee choice.
Exchanges still open; small businesses still have more than one plan option
What the rule would not do—despite a multitude of reports saying otherwise—is strip small businesses of any coverage choice whatsoever, essentially forcing all small business employers and their workers into one health plan.
Indeed, word on the street is that all small businesses that enroll in exchanges will have access to only one plan. Some reports have even gone as far as saying this plan will be government-run. Neither one of these is true.
Multiple private plans still available
Whether the rule is finalized or not, come 2014, two things will be true: there will be a full array of private health plans offered through the small business exchanges, and employers will be able to choose a plan from them. Their employees can then decide whether to enroll in it. This is essentially how the small group market works right now. What the rule means is that employees themselves will not have a menu of plans to choose from until 2015—which is a new benefit the law provides for small businesses.
Only applies to certain states
It’s also important to note the rule requires only states that have federally facilitated exchanges to delay these features a year. Federally facilitated exchanges are those created by the federal government in states that haven’t chosen to create them on their own. The 17 states implementing their own exchanges can still extend employee choice and premium aggregation to their customers starting in 2014. Nearly 40% of small businesses in this country do business in the 17 states implementing their own exchanges. That means there will be employee choice among health plans for those businesses next year—if their states choose to give it to them.
No impact on self-employed
What’s more, delaying this rule does not impact America’s 22 million self-employed individuals, nearly 30% of whom are uninsured. As planned, these entrepreneurs will still be able to purchase insurance through the individual exchanges in 2014—a huge boon to owners who have struggled to purchase affordable insurance for decades.
The Bottom Line
While certainly disappointing, delaying employee choice and premium aggregation is not the end of the world. Starting next year, small employers will still be able to pool their buying power in the exchanges, giving them the kind of clout large businesses currently enjoy. They’ll still get administrative help and, in many places, will have more choices of plans than they currently do. All the original features of exchanges will go into effect in 2015.
Small Business Majority has been talking to real small businesses across the country since the law was passed three years ago. We know they like the features of the exchange that could be delayed, along with other key provisions including: 1) being able to pool their buying power; 2) the Medical Loss Ratio provision requiring insurers to spend 80% of premium dollars on care; 3) the preexisting condition ban; and 4) the small business healthcare tax credit, which in 2014 will only be available to small business owners who purchase coverage through an exchange. Our national opinion polling further underscores their support for these features.
We hope the proposed rule isn’t finalized, because small businesses nationwide are looking forward to employee choice and premium aggregation. Nevertheless, these features will still be in the exchanges in 2015—albeit a year late.