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Where is small business health insurance headed?

July 17, 2014

I’ve tried to filter through all the vested interest and political noise in media to gain an understanding of where the small business health insurance is really headed. It seems that for every point under this topic there is sharp disagreement. I browsed through several hundred publications in forming this summary opinion for my own use in addressing client questions. This is a summary – without source references – of everything I could find:

Quality of information: Most of the information published in this field comes from those with a vested interest and political agendas. Terms like “may qualify” or “could enroll” dominate the reports. Little actual data is available. As a result, it is difficult to get to the truth.

Qualifying for tax credit: HHS says up to 4 million small businesses may qualify for a tax credit if they provide health insurance. Inc. Magazine says the number is actually about half of that at about 2.1 million. Presuming that median size of this population is between 1 and 2 employees (per U.S. census data), then the number of people affected by this issue is around 3 million. Deloitte says that 6 million to 13 million people could enroll through SHOP by 2021 but does not project what portion may qualify for the tax credit. The large majority insurance industry sources say few or none of their small businesses actually qualify for the credit. IRS says that is will audit claims for credit but has not published results so far. As a result, no data is available on whether any firms actually qualified for the credit that became available for 2010 and subsequent years.

Advantages of SHOP: There are two primary potential advantages of using the Small Business Health Options Program (SHOP): 1) eligibility for employer tax credits, 2) built-in employee choice. Employee choice does not apply in PA or NJ for 2015.

Disadvantages of SHOP: The primary advantages of not using SHOP are: 1) wider range of choices, 2) better service.

SHOP vs. private exchanges: In the few states reporting SHOP enrollments (not PA or NJ), results are poor so far. Private insurance exchange growth is clearly booming with plenty of investment capital, technological innovation and fewer regulatory boundaries. As a result, SHOP is lagging and private exchanges are booming.

Online exchanges vs. traditional enrollment: The large majority if small businesses are using traditional enrollment (physical work-site) methods rather than an online self-serve exchange.

Individual vs. Group insurance: There is still a strong belief among industry sources that individual exchanges are better choice for the majority of small businesses. This conclusion appears to be gaining traction in mid-2014. Plenty of hypothetical comparisons are published but no actual data is available to actually verify this opinion. Predictions of imminent demise of the small business group insurance market are unsubstantiated.

Diversity of opinion: There is agreement are clear that “one size does not fit all” with regard to insurance advice and that there are exceptions to every trend point listed here.

My personal disclosure: I don’t have any ownership interests in the post-reform health insurance market. I sold most of my insurance business in 2008 and lapsed the remaining health insurance appointments by the end of 2010. I do continue to receive payments for my web sites, writing and referrals to insurance exchanges. I continue to receive requests for advice in various forms and I would be open to consider possibilities to re-enter the market in the future. For that reason, I follow this topic closely.

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