Insurance Space

Small businesses and self-employed individuals hope to get better deals on health insurance through the new exchanges that would be created under health care reform legislation.

These new marketplaces should provide up to 30 million Americans with an easy-to-use way to shop for coverage by offering a menu of plans, presented in a Web-based standardized format. By creating a large pool of customers, the exchanges should be able to get better insurance at a lower cost than individuals or small businesses could get on their own.

That’s the theory. In reality, certain provisions in the health care bill could limit the exchanges’ effectiveness. Their success also will depend on how state and federal regulators implement them.

“There is more that we don’t know than we do know” as to how the exchanges will work, said Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority, the exchange created by health insurance reform in Massachusetts. “Implementation is 90 percent of the game,” he said.

In Massachusetts, health care reform has expanded health insurance coverage, but it has so far failed to control costs.

Creating a national health insurance exchange — or a system of state or regional exchanges — “has incredible potential if it’s done right,” said Terry Gardiner, national policy director for Small Business Majority, an organization that supports health care reform.

“People have just not focused on the mechanics of the exchange enough,” he said.

Payment headaches need fixing

These mechanics could make the difference on whether the exchange succeeds or fails. For example, under the House bill, employees of eligible small businesses could choose coverage through any of the plans participating in the exchange. Their employers would have to write checks to each of the plans selected by their employees, instead of simply paying the exchange for their share of the coverage. That could be too much of a hassle for many firms.

 Small businesses also could end up paying different premiums for different employees, said Timothy Jost, a Washington and Lee University law professor who specializes in health regulation.

 “That’s a real problem,” he said.

“Small business owners should be able to write one check to the exchange,” Gardiner said. “That’s the idea. It should be simple.”

If Congress doesn’t allow this, “I do not believe there will be any small business enrollment through the exchange,” Kingsdale said.

Gardiner thinks Congress will fix this problem, which was created by the combination of Congressional Budget Office accounting rules and the political goal of keeping the official cost of health care reform below $1 trillion. Under CBO rules, if the exchanges paid the employers’ share of premiums to insurers, that would be counted toward the cost of health care reform to the federal government, even though the exchanges would be compensated for these premiums by employers.

“CBO and politics are getting in the way of rational policy,” Gardiner said.

Required coverage too rich?

Some small business lobbyists also fear that the exchanges won’t provide a cheaper alternative to insurance that is now available on the market. That’s because plans sold in the exchange must meet essential benefits standards that will be established by the federal government. These standards likely will provide more extensive coverage than the policies that many small businesses and self-employed individuals now buy.

“My biggest concern is the benefits are going to be too rich for small employers to purchase,” said Amanda Austin, the Senate health care lobbyists for the National Federation of Independent Business.

The tax credits available through the bill to small businesses aren’t sufficient to offset these added costs, the NFIB contends.

Kristie Arlsan, who heads the Washington lobbying efforts for the National Association for the Self-Employed, has similar concerns. Many self-employed individuals currently buy relatively cheap catastrophic health insurance policies, with additional riders for specific health needs. They would be forced to buy more extensive coverage under health care reform.

The CBO estimates that individuals would pay 10 to 13 percent more for health insurance under the Senate bill, compared with what their premiums would be without the legislation. About 57 percent of these individuals would be eligible for government subsidies to reduce their out-of-pocket expenses, but that still leaves many self-employed individuals with higher insurance costs.

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Tags: Health insurance