While the state sponsored Health Insurance Exchanges (HIX) are at the helm of most health reforms related discussions, the SHOP exchanges are an equally critical piece of the health reforms debate. By January 1, 2014, not only the HIX but also the Small Business Health Options Program, commonly referred to as SHOP is scheduled to become operative.
Traditionally, small businesses pay 18% more than large employers for the same health insurance policy. Health coverage providers too, may charge different premiums from small employers based on their previous health claims and the industry that the small employer operates in. The disparate rates resulting from high broker fees, fixed administrative costs and adverse selection tend to adversely impact the small businesses and their employees.
Average annual healthcare premiums over the last decade have increased by over 113% for employer-sponsored family coverage. Because of their smaller size, small employers find it difficult to manage such high escalations in premium rates, which results in increased instances of an employer dropping insurance coverage altogether.
For successful implementation of SHOP exchanges, it is important to understand the fundamental principle behind setting up a SHOP exchange. Not only that, it is also imperative to understand clearly, how an ideal SHOP exchange can help boost small businesses.
A well-designed SHOP exchange will operate as a marketplace that offers a variety of cost-effective, high quality health insurance coverage options to small businesses and their employees. A well-functioning SHOP exchange can aid in:
• Reducing extra premiums that small employers traditionally pay and help in containing the unpredictable yearly rise in health premium rates, by adopting measures such as, combining small business plan purchasing power and improving economies of scale
• Ensuring that employers and employees have a wide range of plans, insurers and providers to choose from and that portability of health coverage is possible
• Simplifying the insurance application process by providing complex information in a clear and easy to understand format and facilitating easy comparison of plans, insurers, provider networks etc.
• Decreasing the administrative burden of managing employees’ health benefits, for employers
• Boosting innovations in customer experiences, quality of medical care and competitive premium rates as a direct result of healthy competition in the insurance and provider market
The SHOP exchanges will also need to comply with the regulations mandated by the healthcare reforms. Some of these regulatory directives are:
• Set up measures to allow certification, re-certification and de-certification of Qualified Health Plans (QHP’s)
• Make available standard information on participating plans, which can help in easy comparison of plans
• Ensure ready assistance through a toll-free telephone number
• Host and manage enrollment periods as per the federal guidelines laid out by Department of Health and Human Services (HHS)
The deadline for SHOP exchange plan submission is on January 1, 2013 and if the states are unable to draw up a viable plan by then, the federal government will step in to establish their own SHOP exchanges. States lagging in their SHOP exchange plans will need to partner with firms offering sophisticated, ready-to-deploy SHOP exchange solutions to meet the federal timelines.
This is part 1 in a 3 part series explaining SHOP exchanges, the challenges states will face, their state of readiness and steps that the states need to take to successfully deploy SHOP exchange. Come back for part 2 next week!