Small businesses and health care reform

This week, the Obama administration announced that health insurance exchange enrollments quadrupled in November after a troubled debut in October. Administration officials declared that the website glitches that plagued healthcare.gov were now a thing of the past. As I noted earlier this month in an interview with Gene Valicenti on 630-WPRO, however, the health insurance exchanges remain a work in progress. Insurers continue to report problems accessing subscriber data entered through healthcare.gov. Corrupted or missing data raises insurers’ costs and also delays the completion of the enrollment process. The Obama administration has yet to release demographic data on new enrollees. This is significant, because the long term “affordability” of the Affordable Care Act (ACA) depends not only on the number of newly insured Americans but also by the characteristics of these newly insured consumers. Two issues, in particular, warrant close observation in the coming months.

Before Thanksgiving, the Obama administration announced that it would postpone launch of the Small Business Health Options Program (SHOP) by one year for states with federally operated exchanges. Thus, in more than 30 states, small firms who expected to purchase coverage through the exchanges are now scrambling to renew their existing health insurance coverage or are shopping for other plans. Since these small businesses will not join the exchanges during the ACA’s inaugural year, their employees – many of whom are relatively young, healthy workers –  will not be available to offset the costs of older, sicker individuals purchasing coverage through the exchanges. As a result, per-enrollee costs for the first year of the ACA may be considerably higher than expected.

The second challenge flows from the first. Insurers are under no obligation to participate in the new health insurance exchanges – indeed, many of the nation’s largest carriers opted out for the first year. If costs per enrollee exceed projections, insurers are likely to raise rates or drop out of the marketplaces altogether. If insurers raise rates substantially, some consumers who purchased coverage this year may opt to not renew their coverage, or alternatively, may select cheaper plans with higher out of pocket costs. Stay tuned…the rollout of the ACA is never dull!

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