A key provision of the Patient Protection and Affordable Care Act has failed to attract many customers. The Act, better known as Obamacare, created the Small Business Health Option Program (SHOP), which provides for state-based health insurance exchanges designed to serve small businesses. Nationwide less than 80,000 people have enrolled in SHOP exchanges, with almost half of that number coming from one state, Vermont.
Only 2 percent of eligible small businesses have even investigated SHOPs, and even fewer have enrolled, according to John Graham of the National Center for Policy Analysis. Only 11 SHOP exchanges have been implemented. The Obama administration delayed full implementation of the program until 2015.
“I think that small businesses have more than enough to do dealing with customers to waste time trying to figure out how to navigate a SHOP exchange,” said Graham. “Unlike large businesses, they do not have lobbyists in DC to minimize the harm inflicted on them by regulations.”
Little Value for Employers
According to the Web site ACASignups.net, 88 percent of all SHOP enrollees have come from just four exchanges: California, District of Columbia, New York, and Vermont. Both Vermont and DC combined their small business and small group markets, mandating a business use the SHOP exchange if it wants to offer small group insurance to its employees.
“I don’t see where the SHOP exchange really adds much value from a small employer’s perspective,” said Edmund Haislmaier of the Heritage Foundation, adding, “Some employers might want to offer a group plan [but may be] better off just buying it through a broker with different competing insurers… There’s not much reason to go on the SHOP exchange… You might actually have more options outside the SHOP exchange than on.”
One of many states where enrollments through the SHOP exchange has lagged far behind projections is Rhode Island. In a May 2013 filing with the U.S. Department of Health and Human Services, Rhode Island’s exchange agency, HealthSourceRI, predicted 17,000 people would obtain coverage through the SHOP exchange in 2014.
According HealthSourceRI, by March 31 of this year the SHOP exchange had enrolled only about 1,800 people. HealthSourceRI has declined to make more recent enrollment figures available.
A 2012 report by Christine Eibner and Carter C. Price of the RAND Corporation predicted that by 2016 approximately 42 million Americans would receive their health coverage through the SHOP exchange.
Individual Exchange Better Option
It may also make more economic sense for most small employers to drop coverage and send their employees to the individual exchange. Individual employees may be better off that way as well.
“If the employer provides coverage,” Haislmaier said, “the money spent is money that isn’t going to the employees in cash wages, but it’s tax-free, so in effect there’s a subsidy there. But if the employer doesn’t provide it, they can normally give the employees a bit more in cash, and they go to the exchange. If they are lower-wage workers, even $15-20 an hour, they’re going to be getting a bigger subsidy from the exchange.”
Under the ACA, individuals are eligible for subsidies on state-based exchanges only if their employers do not offer affordable coverage.
Erosion in Employer Insurance
Haislmaier notes the lack of interest in the SHOP exchanges by small employers is consistent with the overall decline in employer-provided health insurance, a trend that has accelerated since passage of Obamacare.
“The bigger issue is the decline in the employer-insured market. When you look at those figures and you net it out, you see a decline in fully insured [individuals] of almost 4.8 million, and an increase in self-insured of almost a million, so your net employer market decline is about 3.8 million,” Haislmaier said, citing a recent study from the Heritage Foundation showing a steep drop in the number of people receiving health insurance from their employers.
“That’s the real thing that’s going on here,” Haislmaier said, “and it’s not surprising. It’s what we’ve been predicting since this thing was enacted.”
Loren Heal ([email protected]) is a freelance reporter for The Heartland Institute.