Health Affairs

Small Business Insurance Exchanges

Bethesda, MD -- A new policy brief from Health Affairs and the Robert Wood Johnson Foundation focuses on small-business health insurance exchanges, which states are to create under the Affordable Care Act and are to be up and running by 2014. The brief is being issued in conjunction with the February 2012 issue of Health Affairs, which contains a number of studies analyzing the opportunities, risks, and design and regulatory challenges facing the states as they create these exchanges.

A key provision of the health reform legislation requires states to create exchanges through which individuals and small businesses can review, compare, and purchase health insurance. The so-called Small Business Health Options Program (SHOP) is intended to offer group health plans to companies with 100 or fewer employees. States have the option of merging these small-business exchanges with the other type of exchange, which is intended for individuals.

By 2019 about 28 million Americans are expected to be covered through individual or SHOP exchanges, placing the market power of the exchanges on par with, possibly even exceeding, that of large employers.

The brief covers the following:

• The governance of SHOP exchanges: The entities that states can create to govern their SHOP exchange (an agency, independent authority, or nonprofit corporation) and the models for selecting plans and determining compliance requirements.
  
  
• Attracting and enrolling participants: A key function of the exchanges is to provide "user-friendly" information, allowing people to compare plans. In addition, exchanges will engage liaisons (called navigators) to help guide consumers and businesses as they make their health coverage choices. Finally, a SHOP exchange will handle many of the administrative functions a larger company delegates to its human resources department, an infrastructure many small businesses lack.
  
  
• Challenges ahead: To be successful, SHOP exchanges must attract sufficient participation to establish a broad, stable risk pool. Some small companies may opt out by maintaining a "grandfathered" health insurance plan that existed at the time the Affordable Care Act was passed. Other small businesses may elect to self-insure, as many larger companies do.
  
  
• Timing: Although 49 states and the District of Columbia have begun planning exchanges, a little more than half of them have moved beyond the planning stage. With the Supreme Court ruling on the constitutionality of the Affordable Care Act expected within the next six months and with national elections looming, the future of SHOP implementation efforts could be thrown into question.

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at www.healthaffairs.org. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.