In the first part of this post, we discussed how public vs private enrollment is progressing, and private exchange enrollment is set to out-enroll public exchanges by a decent margin. In the scheme of things, small businesses are being left out. Small businesses lack the bulk power of large businesses, and that’s why traditional health plans have never truly focused on small businesses. With Obamacare SHOP exchanges, however, enrollment for small businesses is going to change. Before we begin with an analysis of SHOP exchange data, let’s take a look at how health insurance has traditionally worked in small and large employers.
Health Benefits in Small vs Large Employers
According to available data, firms with fewer than 50 employees have disproportionate health insurance coverage. While firms with less than 50 employees comprise 25 percent of the American workforce, the number of uninsured in these firms stands at a whopping 40 percent. The smaller the firm is, the less likely it is to offer its employees health insurance. For instance, only 45 percent of companies with 3 to 9 employees offered health insurance to its workers. In the 10-24 employee range, the percentage increased to 68 percent. Similarly, 85 percent of firms with 25-49 employees offered health insurance to its fulltime employees. In the 50-199 range, the number was much better at 91 percent.
For large firms, the numbers were much better. Approximately 98 percent of the smallest large firms, with 200 to 999 employees, offered health insurance to employees. For 1,000 to 4,999, the number was 100 percent and for 5,000+ employees, the number was 99 percent. The difference between small and large employers was noteworthy, with only 57 percent of all small firms offering health benefits to their employees, as compared to 99 percent of all large firms offering health benefits.
Even with a small percentage of small firms offering insurance, the cost and administrative effort required is much higher for small firms. For instance, small businesses pay 18 percent more on average than what large businesses pay for the same health insurance benefits. Therefore, for every dollar spent toward premiums, large businesses get better health insurance than small businesses. Most of the costs go toward the administration required for managing health benefits for a small number of employees in the smaller business. Moreover, private exchanges cannot cater to the typical, limited demand of small businesses.
Private vs SHOP Exchanges
With all the above data, one thing is clear – small businesses have been getting a raw deal on health benefits. With Obamacare, employee enrollment should take a different shape for small businesses. The SHOP exchange is the answer to the gap that currently exists between health insurance quality available to small and large businesses. By freeing small businesses from administrative costs & time associated with management of health benefits for employees, SHOP exchanges will provide better health benefits to small businesses at much lower rates. While SHOP exchange rollout will coincide with the next open enrollment period from November 15, some states have already gone ahead and implemented their SHOP exchange.
Seventeen states and DC have been running their SHOP exchange since 2013 and have been experiencing varied levels of success. California, for instance, has 4,900 lives insured under the SHOP exchange, while nearly 3,000 businesses in Colorado are participating in the state’s SHOP exchange. Although the numbers are low at the moment, the enrollment should see a surge when the federal SHOP exchange goes live in November.
Another snag in SHOP exchanges is the lack of the employee choice feature. The employee choice feature allows employee to choose their own health plan as opposed to the health plans already selected by their employers. This feature will be rolled out in 2016, along with the widening of small business coverage net to businesses with at most 100 employees.
Although there is still some remaining ground that SHOP exchanges need to cover for providing all intended benefits to small businesses, they are already making a difference in states where they are functional. On the other hand, large businesses are gaining immensely from the private exchanges that are working on the model of public exchanges under Obamacare.
The Affordable Care Act has drastically changed the health coverage market for organizations and employees. Better benefits, better price, larger coverage net, and more options are the highlights for employees, while organizations are enjoying reduced costs, reduced administrative effort, and conveniently outsourced health benefits management in this evolved market.