HHS is considering yet another Obamacare delay, this time of the law’s 2016 expansion of the small group market.
The U.S. Chamber of Commerce and the insurers’ trade association, among others, have asked HHS Secretary Sylvia Mathews Burwell for a two-year delay in broadening that market to businesses with up to 99 employees. It currently includes employers with fewer than 50 workers.
The change is intended to help make insurance more affordable for the smallest employers by expanding the risk pool to include larger companies and to help stabilize the SHOP exchanges – Obamacare’s Small Business Health Options Program – by bringing in more participants. But next year, companies with 50-99 workers will also face the long delayed employer mandate, which will require them to offer their workers coverage or pay a penalty. The two new requirements shouldn’t be foisted on businesses at the same time and would drive some premiums higher, the Chamber and other organizations say.
“Our big concern is making sure that efforts to expand coverage do not undermine affordability,” said Katie Mahoney, the Chamber’s executive director of health policy. “It would seem unfortunate if the efforts and time frames to stabilize the market and mitigate premium increases were not permitted as the law intended.”
The mandated expansion will apply to about 150,000 employers with 3 million workers, according to a brief filed this month by the American Academy of Actuaries. When it goes forward, employers that don’t choose to self-insure will be able to buy plans through the SHOP exchanges. Yet those will come with a host of restrictions governing small-business coverage that don’t apply to the large-group plans the vast majority of the companies now offer.
Obamacare regulates large-group coverage with a far lighter touch. Premiums are typically set based on the actual claims experience of an employer, rather than that of the entire small business market, which has historically been more expensive to insure. The health care law also imposes Obamacare’s age-banding and other rating restrictions, as well as requirements to cover the law’s 10 essential health benefits – which would increase premiums for employers with younger, healthier workers, according to the actuaries’ brief.
“If they’re being dragged into this pool of more expensive coverage, they’re going to be subsidizing that more expensive coverage,” said Paul Fronstin, a senior associate with the Employee Benefits Research Institute. “The expectation is that their rates will go up, and the rates in that smaller group will go down.”
HHS did not respond to questions about its plans for the expansion. “We are open to hearing various perspectives and analyses of all provisions of the law as we implement them,” spokeswoman Katie Hill said in an email.
Mahoney said a two-year delay would help keep premiums stable and give Congress time to head off any expansion. The Chamber is pushing to preserve the traditional definition of the small group market as employers with 50 or fewer workers.
The department’s decision could be imminent, said John Arensmeyer, CEO of the Small Business Majority and a SHOP advocate. Insurers begin filing their proposed rates for next year in May and will need to know in advance whether the expansion will take place. Delaying it would further handicap SHOP exchanges that already are suffering from a lack of employer interest, Arensmeyer said.
“You need to get everybody playing by the same rules, then you get true competition, driving prices down, to make insurance better for everybody,” he said.
Fronstin agreed. “It would make coverage more affordable for [the small group] market, make it more viable,” he said. “You need a critical mass to be successful. And how do you get a critical mass? You expand the sizes of the groups that either have to or are allowed to go in.”
Still, other Obamacare factors could make the expansion problematic next year.
Under the current rules, employers in many states can keep their pre-Obamacare plans until well into 2017, so those that have a good deal or simply don’t want to make any change can stay out for two more years. That was the “keep your plan” administrative fix the White House put in place under pressure as Obamacare’s first enrollment season began in 2013 after many businesses and individuals learned that their coverage was being canceled.
Additionally, employers with younger and healthier employees would have an incentive to insure their own workers rather than join the small group market and risk possible premium increases as part of a broader risk pool.
Both mean that an expanded small group market could be at risk for adverse selection, the actuaries’ brief notes.
In their letter, the Chamber and other business organizations cite an estimate by Oliver Wyman that about two-thirds of the people covered in the expansion group would see a premium increase of 18 percent in 2016.
“The increased premiums will decrease the ability for businesses and employees to provide and purchase coverage,” the letter says. It then highlights the coming deadline for insurers to file their rates for next year, adding “[a]s important as a delay in this change is, the timing is extremely narrow.”
