Bloomberg News

Obamacare Small-Business Plan Starts Slow as Employers Stand Pat

January 17, 2014

Enrollment in Obamacare health plans for small businesses is off to a slow start, leaving in doubt whether the U.S. program can attract enough customers to satisfy insurers.

Greeted by higher premiums, less generous coverage and more paperwork, small businesses that offer health coverage to employees are choosing to renew existing plans rather than buy them through President Barack Obama’s program. Complicating matters is the government’s failure to complete the online exchange for small businesses; in 36 states, there will be no website offering ready information on the plans until November.

The program is supposed to help insure the 31 million people who work at companies with fewer than 50 employees. In Kentucky, just 14 companies signed up for Obamacare’s small business plans as of Jan. 1, while Colorado enrolled 101, and Connecticut 106.

“Lousy,” said Kevin Counihan, the chief executive officer of Connecticut’s health exchange, Access Health CT. “We’ve done a very good job on the individual side. We’ve dropped the ball on the small-business side.”

The small-business exchanges, known as SHOP, contrast with the improving business in the market for individual plans set up in October under the Patient Protection and Affordable Care Act of 2010. The U.S. reported this week that 2.2 million people as of Dec. 28 had obtained private health coverage through the federal- and state-run individual-market exchanges.

A core part of the U.S. health-care overhaul is the employer mandate that requires companies with 50 or more workers to offer affordable health insurance by 2015 or face a fine of as much as $3,000 per employee. While smaller businesses aren’t required to offer medical coverage, if they do, the plans must meet Obamacare standards starting this year.

2015 Wait

Many small businesses as a result took the strategy of renewing existing health plans for 2014, letting them put off the decision on whether to join Obamacare in 2015 or stop offering coverage to their workers. That may mean enrollment in SHOP exchanges won’t take off until the end of the year, said Carrie Banahan, executive director for Kentucky’s health exchange, Kynect.

WellPoint Inc. (WLP:US), which offers its Anthem plans on the Kentucky and Connecticut small-business exchanges, saw strong early renewals of its 2013 plans in Kentucky, reducing interest in the exchange plans, Kristin Binns, a spokeswoman for the Indianapolis-based insurer, said in an e-mail.

“We estimated less small-group movement to the SHOP exchange than we did individual movement to the individual exchange,” Binns said. “And in many states early renewal impacted SHOP uptake.”

Expensive Premiums

Part of the lag can also be blamed on SHOP plans that are too expensive, with premiums as much as 90 percent higher than what some firms paid last year, according to John Humkey, the owner of Employee Benefit Associates Inc., a Lexington, Kentucky-based insurance broker.

Humkey said he has signed up only one small-business client for Obamacare, a local microbrewery that primarily wanted to take advantage of a complicated tax credit worth as much as 50 percent of the cost of premiums for businesses that can meet certain conditions. Most businesses aren’t interested enough in the credit to jump through the hoops, he said.

“The small-business owners, while they are out there working hard to manage their business, their focus is not on trying to understand the health-care law in order to put together a benefit package,” Humkey said.

No Deadline

Small businesses also face no deadline to enroll, unlike individual Americans shopping for themselves. Exchanges can sell small-business plans year round, while enrollment for individual plans closes on March 31.

Exchanges in larger states aren’t doing much better with their business plans. In New York, about 5,000 employees of small businesses have enrolled in the SHOP exchange, James O’Hare, a spokesman for the state’s Department of Health, said in an e-mail.

California, the most populous U.S. state, has enrolled about 500,000 people in its individual exchange. It has yet to provide a look at its small-business market. The state will report small-business participation “later this month,” Anne Gonzales, a spokeswoman for Covered California, said in an e-mail.

No figures are available for small-business enrollment in the federal exchange, which serves 36 states including Texas and Florida, Aaron Albright, a spokesman for the U.S. Centers for Medicare and Medicaid Services, said by phone.

About 31 million people were employed by businesses with fewer than 50 workers each, or just more than one-quarter of total U.S. employment, according to 2011 Census Bureau data.

Fewer Covered

The smaller the company, the less likely that its workers are offered health insurance, according to the Kaiser Family Foundation, a Menlo Park, California-based nonprofit that studies health issues. In 2013, just 45 percent of workers at firms with fewer than 10 employees had insurance, according to Kaiser’s annual survey of employer benefits. The numbers with health benefits rose to 85 percent at companies with 25 to 49 workers, and 99 percent at companies with 200 or more employees.

David Allen, the CEO of Flatirons Practice Management, a medical billing company in Boulder, Colorado, said he tried using the state’s health exchange to buy a new policy for his employees and didn’t like what he found. While he could have paid a lower premium, the deductibles were too high for the exchange plans, he said.

Shifting Burden

“It felt like the wrong thing to do, because we were shifting the burden off of me to my employees,” Allen said in a phone interview. “I don’t need the insurance exchange to do that for me.”

Instead, he renewed his 2013 coverage until the end of October of this year. He might be attracted back to the exchange, he said, if it offers a product “more consistent” with his current plan, for which he estimated his company will pay about $117,000 this year. That’s about 22 percent more than last year, he said, an increase he blames partly on requirements of the health-care law.

Competition has also been a factor for the Obamacare exchanges. The Connecticut Business and Industry Association, a trade group in that state, has been selling health insurance to companies since 1995 using an exchange-like system.

“We have thousands of small businesses in the state,” Phil Vogel, a senior vice president for CBIA Service Corp., the division that runs its health exchange, said by phone. “We’re pretty well known and pretty entrenched with the business community.”

Little Effect

Vogel and Ken Comeau, a vice president with the organization, said they don’t even consider Counihan’s Obamacare exchange to be competition. Businesses that turn to CBIA have their choice of plans from three companies, including two -- Hartford, Connecticut-based Aetna Inc. (AET:US) and Oxford, a brand of UnitedHealth Group Inc. (UNH:US), the largest U.S. health insurer -- that aren’t offered on the state exchange.

“Our focus is really to bring a product and to bring services to the table that businesses want,” Comeau said. “We focus completely on that, versus the folks involved with the SHOP who are challenged with bringing up something that’s brand new to them, that really fits into a mold that got established primarily at the federal level and has to meet certain obligations of the law. It’s a very different mindset.”

Counihan, of the Connecticut Obamacare exchange, hasn’t given up. His business exchange offers plans from WellPoint’s Anthem brand and UnitedHealth that include a larger selection of medical providers than the CBIA plans, he said.

He plans to improve his agency’s relationships with insurance brokers and expects that the exchange’s offerings may look more attractive next year when small businesses can no longer renew old policies. He thinks insurers will stay in the exchange as long as he can convince them “there’s light at the end of the tunnel,” he said.

“To the extent we can’t do that, well, that’s a different story,” he said.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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