Small Firms’ Offer of Plan Choices Under Health Law Delayed

Robert Pear, NY Times April 1, 2013

WASHINGTON — Unable to meet tight deadlines in the new health care law, the Obama administration is delaying parts of a program intended to provide affordable health insurance to small businesses and their employees — a major selling point for the health care legislation.

The law calls for a new insurance marketplace specifically for small
businesses, starting next year. But in most states, employers will not
be able to get what Congress intended: the option to provide workers
with a choice of health plans. They will instead be limited to a single

The choice option, already available to many big businesses, was
supposed to become available to small employers in January. But
administration officials said they would delay it until 2015 in the 33
states where the federal government will be running insurance markets
known as exchanges. And they will delay the requirement for other states
as well.

The promise of affordable health insurance for small businesses was
portrayed as a major advantage of the new health care law, mentioned
often by White House officials and Democratic leaders in Congress as
they fought opponents of the legislation.

Supporters of the law said they were disappointed by the turn of events.

The delay will “prolong and exacerbate health care costs that are
crippling 29 million small businesses,” said Senator Mary L. Landrieu,
Democrat of Louisiana and the chairwoman of the Senate Committee on
Small Business and Entrepreneurship.

In the weeks leading up to the passage of the health care legislation in
2010, Ms. Landrieu provided crucial support for the measure, after
securing changes to help small businesses.

The administration cited “operational challenges” as a reason for the
delay. As a result, it said, most small employers buying insurance
through an exchange will offer a single health plan to their workers
next year.

Health insurance availability and cost are huge concerns for small
businesses. They have less bargaining power than large companies and
generally pay higher prices for insurance, if they can afford it at all.

The 2010 law stipulates that each state will have a Small Business
Health Options Program, or SHOP exchange, to help employers compare
health plans and enroll their employees.

One of the most important tasks of the exchange is to simplify the
collection and payment of monthly premiums. An employer can pay a lump
sum to the exchange, which will then distribute the money to each
insurance company covering its employees.

The Obama administration told employers in 2011 that the small business
exchange would “enable you to offer your employees a choice of qualified
health plans from several insurers, much as large employers can.” In
addition, it said, the exchange would “consolidate billing so you can
offer workers a choice without the hassle of contracting with multiple

Exchanges are scheduled to start enrolling people on Oct. 1, for
coverage that begins in January. However, the administration said that
the government and insurers needed “additional time to prepare for an
employee choice model” of the type envisioned in the law signed three
years ago by President Obama.

D. Michael Roach, who owns a women’s clothing store in Portland, Ore., said the delay was “a real mistake.”

“It will limit the attractiveness of exchanges to small business,” he
said. “We would like to see different insurance carriers available to
each of our 12 employees, who range in age from 21 to 62. You would have
more competition, more downward pressure on rates, and employees would
be more likely to get exactly what they wanted.”

John C. Arensmeyer, the chief executive of Small Business Majority,
an advocacy group, said that the delay of “employee choice” was “a
major letdown for small business owners and their employees.”

“The vast majority of small employers want their employees to be able to
choose among multiple insurance carriers,” Mr. Arensmeyer said.

Small Business Majority supported Mr. Obama’s health care law.

That support was invaluable to Democrats who pushed the bill through
Congress. Representative Nancy Pelosi of California, who was speaker at
the time, cited the group’s research as evidence that “small businesses
will benefit from health insurance reform.”

However, in recent weeks, insurance companies urged the administration to delay the employee choice option.

“Experience with Massachusetts has demonstrated that employee choice
models are extremely cumbersome to establish and operate,” the health
insurer Aetna said in a letter to the administration in December.

Insurers said that the administration was partly responsible for the
delay because it did not provide detailed guidance or final rules for
the small-business exchange until last month.

Businesses with up to 100 employees will be able to buy insurance in the
exchanges. In 2014 and 2015, states can limit participation to
businesses with 50 or fewer employees. Companies with fewer than 25
workers may be able to obtain tax credits for up to two years of
coverage bought through an exchange. States can open the exchanges to
large employers in 2017.

A few states running their own exchanges, including California and
Connecticut, said they planned to offer an employee choice option next
year, though it was not required by the federal government.

A stated goal of the 2010 law was to increase “consumer choice” and stimulate competition among insurers.

The law makes it easier for consumers to compare health plans by
defining four standard levels of coverage, ranging from the least to the
most generous. The law says an employer can pick a level of coverage
and then allow employees to choose among all the health plans available
at that level.