Rep.  Axne Leads Push to Expand Health Care Plans for Small Businesses

Rep. Axne Leads Push to Expand Health Care Plans for Small Businesses

Today, Rep. Cindy Axne (IA-03) wrote to the Centers for Medicare and Medicaid Services Agency (CMS) inquiring about the agency’s future efforts to improve health insurance options for small businesses, including its efforts to revitalize the Small Business Health Options Program, or SHOP.

SHOP, established by the Affordable Care Act, created state and federal exchanges for small employers with 50 employees or fewer to offer high-quality health insurance plans and, for eligible employers, access to the Small Business Health Care Tax Credit. Unfortunately, SHOP has fallen well short of the Congressional Budget Office’s projected participation of 4.6 million employees, reaching less than 10% of that goal. In addition, twenty-eight of the fifty SHOP exchanges currently have no plans available, including Iowa’s.

Over the years, SHOP was further weakened by rules established by CMS, which allowed the program to shift to a “direct enrollment model” which provided less assistance to small businesses and employees, and removed a requirement for large insurers to participate in the SHOP exchange in order to participate in a federally facilitated individual exchange.

In the letter, Rep. Axne outlines the importance of SHOP exchanges and requests more information on how the agency is working to strengthen the program.

“As a small business owner, I know how hard it is to find affordable health care plans, which is why I wrote a letter to CMS inquiring about what they can do to support more affordable options for small businesses to offer healthcare to their employees. Data show less than 60 percent of the 31.7 million small businesses in the US offer health benefits, and that’s not nearly enough. Small businesses need to be able to offer healthcare packages to support their employees and compete with larger companies to attract good workers,” said Rep. Axene.

This letter was endorsed by Main Street Alliance.

“As an organization that advocates for small businesses across the country, the revitalization of the Small Business Health Options Program (SHOP) is the type of investment that small business owners need to make sure their employees have optimal health coverage. Especially for true small businesses, those with 20 employees or less, SHOP plans are a key part to making small businesses a strong and competitive option to workers especially between rising inflation and labor shortages,” said Naomi Smith, Policy Program Manager of Main Street Alliance.

The full letter can be found here and below.

Dear Administrator Brooks-LaSure,

I am writing to you to request comment on potential actions to help small businesses offer health insurance to their employees, including efforts to revitalize the Small Business Health Options Program, or SHOP.

The SHOP was established by the Affordable Care Act to create state and federal marketplaces for small employers (generally businesses or non-profits with up to 50 employees) to offer employees a range of qualified health plans.[1] The benefits of the SHOP exchange include access to more affordable high-quality private health insurance plans and for eligible entities, access to the Small Business Health Care Tax Credit. For instance, in Massachusetts, it is estimated that small employers and their employees saved an average of 20 percent compared to peers who purchased off-marketplace coverage.[2] Small employers who are eligible for the Small Business Health Care Tax Credit can also receive a credit of up to 50% of the employer’s contribution towards premiums for employees, making the provision of health benefits to employees vastly more accessible and affordable to small employers.[3]

Despite their nation-wide establishment, the execution of the SHOP exchange has fallen short of its vision. Twenty-eight of the fifty SHOP exchanges have no plans available, leaving small businesses to find plans off the Market. Further, the SHOP marketplace has not achieved even 10% of the Congressional Budget Office’s projected participation of 4.6 million.[4] In fact, the Centers for Medicare & Medicaid Services (CMS) estimates that there were only 27,000 small employers and 233,000 employees using the SHOP exchanges across the country in 2017.[5] This level of participation is lackluster, typically accounting for less than 1% of the overall small group market.[6] Such limited SHOP plan availability and low enrollment indicates a major defect in a key resource to small employers aiming to provide their employees’ health benefits.

Notably, many past CMS rules have contributed to SHOP’s underperformance. For example, in 2018, CMS shifted all federally-facilitated SHOPS, or FF-SHOPs, towards a direct enrollment model, meaning that FF-SHOPs would only offer eligibility determination assistance but would no longer handle enrollment for employers or employees, process premium payments , or handle other SHOP functions.[7],[8] At the time, stakeholders were concerned that this change would not help SHOP exchanges function more effectively as then-CMS Administrator Verma hoped but rather diminish the choices available to employees of small employers.[9]

However, the SHOP exchange was seriously debilitated prior to that rule. In December 2016, CMS removed a requirement for large insurers, specifically those with more than 20% of small-group market share, to participate in the SHOP exchange in order to participate in a federally facilitated individual exchange from 2018 onwards.[10] Although it was anticipated that the elimination of this tie-in requirement would reduce insurer participation in SHOP exchanges, CMS prioritized removing the requirement to enable and promote insurer participation in the individual market.[11]

Both of these rules have reduced incentives for insurers and consequently, employers to participate in SHOP. They also remain in place despite notable advances in the health insurance marketplace that have allowed the individual marketplace to thrive and could better accommodate SHOP participation. Insure participation in the individual marketplace has grown steadily over the years, keeping premiums low on the individual marketplace relative to the employer-sponsored insurance marketplace.[12],[13] Additionally, the extension of ACA premium tax credits by the recently signed Inflation Reduction Act is expected to further facilitate individual participation and by extension, incentivize insurer participation in the individual marketplace. Such a robust individual marketplace may be better positioned for tie-in requirements linked to SHOP or other incentives that promote SHOP exchange growth and participation.

Given that only 58% of the 31.7 million small businesses in the US offer health benefits – far less than the 99% of large firms that do so – supporting efforts to better serve small employers and by extension, their employees, is critical.[14],[15] For this reason, I am reaching out to ask that CMS respond to the following questions by November 1st:

  • How has and how will CMS track the growth of the SHOP exchange marketplace? What metrics are used to monitor its effectiveness?
  • Would CMS consider re-evaluating the impact of a tie-in requirement, such as that which previously linked large insurers’ participation in the individual marketplace to SHOP participation, on today’s health insurance marketplace?
    • Should this evaluation demonstrate that a tie-in requirement could successfully promote insurer participation in SHOP without negatively impacting the individual marketplace, would CMS consider future rulemaking that reinstates a tie-in requirement?
  • Given that both state-based and federally facilitated SHOP exchanges operate nationwide, are there any lessons from successful state or federal SHOPs that CMS has observed that policymakers should consider in future legislative efforts?
  • What other initiatives is CMS weighing to improve and revitalize the SHOP marketplace?
  • Does CMS have additional actions it can take, or suggestions for legislation to support small businesses in offering health insurance?

I thank you for your prompt attention to this matter and service to our country.

###


https://www.healthcare.gov/small-businesses/choose-and-enroll/shop-marketplace-overview/

https://www.commonwealthfund.org/blog/2020/state-based-marketplaces-find-value-potential-opportunity-growth-small-business-offering

https://www.crs.gov/Reports/R44065#_Toc71188404

https://www.cbo.gov/system/files/2018-09/42418-ExchangesAugust2010FactSheet.pdf

https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/SHOP-Marketplace-Enrollment-Data.pdf

https://www.crs.gov/Reports/R44065#_Toc71188404

https://www.federalregister.gov/documents/2018/04/17/2018-07355/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for- 2019#p-654

https://www.healthaffairs.org/do/10.1377/forefront.20170515.060112/

https://www.federalregister.gov/d/2016-30433/p-887

https://www.federalregister.gov/d/2016-30433/p-890

https://www.kff.org/private-insurance/issue-brief/insurer-participation-on-the-aca-marketplaces-2014-2021/

https://www.urban.org/research/publication/marketplace-premiums-and-participation-2021

https://www.kff.org/health-costs/report/2021-employer-health-benefits-survey/

https://www.commonwealthfund.org/publications/issue-briefs/2019/sep/small-business-owners-views-health-coverage-costs

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