SHOP Exchange Glitches

November 3, 2014
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Open enrollment for Obamacare’s second year begins next week. In the chaotic launch of HealthCare.gov, the Department of Health and Human Services (HHS) delayed the launch of the sister portal for small businesses. Now, the health insurance exchange for small businesses is expected to open, but it is still plagued with problems.

The Small Business Health Options Program (SHOP) provides an online portal for small businesses with fewer than 50 employees to purchase insurance. The website allows employers to provide a contribution towards an employee’s health insurance purchase.

A new report from the New York Times summarizes the issues discovered during recent testing:

For example, they said, some health insurance plans approved for sale on the exchange did not show up on the website. The site worked well with some web browsers, like Chrome, but not with others, like Internet Explorer and Firefox. Premiums and other charges for some plans were erroneously displayed as percentages rather than dollar amounts — 350 percent rather than $350, for example. For some households, the principal subscriber was listed as a dependent, or vice versa.

HHS is claiming that the website will be functional when open enrollment starts on November 15.

The future success of SHOP is doubtful even if HHS gets the website working. States had the option of creating their own SHOP or relying on the federal exchange. Several states decided to launch their exchanges last year. The results were lackluster:

California signed up 1.4 million people through its individual exchange, but its small-business exchange enrolled only 1,700 companies, with 11,500 employees and dependents. In Minnesota, the small-business exchange signed up 190 employers covering 1,500 people.

The low participation is not surprising since businesses can still purchase insurance outside of an exchange. The primary reason to use a SHOP exchange would be to receive a tax credit. Firms with fewer than 25 workers who purchase via the exchange are eligible for a tax credit to help offset the cost of the employer contribution. Credits can be as large as 50 percent of the employer contribution.

However, the tax credit is unlikely to induce many small businesses to use the exchange. Only a small number of eligible businesses claimed the previous version of the tax credit, which did not require the extra step of a SHOP purchase. According to the Government Accountability Office (GAO), many employers did not claim it due to the complexity in its calculations. Adding another requirement suggests even fewer employers will take advantage of the credit.  Additionally, GAO estimates that very few small firms offer health insurance as benefit to employees because the tax credit is small. Firms are not encouraged to provide the benefit.

HHS had an additional year to get its SHOP website development right. Reports suggest that HHS is still not ready, despite the large cost. But even if the website becomes functional, success of the overall SHOP program looks unlikely.

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