Not a One-Stop SHOP: Small Group Health Option Program Exchanges and the Future for Small Business Health Insurance By Brendan Williams* Most of the public and political attention paid to the Patient Protection and Affordable Care Act (ACA) has focused upon its individual mandate for the uninsured to purchase insurance – a mandate rescinded by the Tax Cuts and Jobs Act signed into law by President Trump1 – or the costs of Medicaid expansion for the thirty-one states that have chosen to embrace it. After years of controversy, and Republican efforts to repeal the law, even casual consumers of the news likely were aware of the challenges facing the individual market for health insurance including high deductibles, premium increases, narrow networks, and under-participation by insurers in offerings through state-run exchanges or the federal Healthcare.gov exchange. Far fewer would be aware of the challenges facing the small group market-and yet increasing the availability of affordable health insurance for small businesses had been a stated goal of the ACA’s architects. In fact, whether this could actually be achieved was the subject of Senate floor debate. As Senate Finance Chair Max Baucus (D., Montana) stated during that debate, “[o]ur bill creates small business insurance exchanges, known as shop exchanges, where small businesses can join together and pool their risks. That will enhance their choice and buying power.”2 Yet this was a complicated process, as Sen. Kit Bond (R., Missouri) complained: One of the gimmicks the majority is using to hide the cost of the bill is a weak tax credit that is supposed to help small businesses in purchasing health insurance. The hitch is that small businesses will only receive the full tax benefits if they have less than 10 employees. If they hire that 11th employee, the tax credit is reduced. At 25 employees the tax credit is no longer available.3 However well-intended, the concept of Small Business Health Option Program (SHOP) exchanges showed little understanding of health care economics, and seemed more designed to put a friendly face on the ACA. Carriers, already making considerable money, were under no obligation to participate in SHOP exchanges even if they might gain additional small business customers interested in obtaining the federal tax credits available to them only through those exchanges. An insurer could make the cold-eyed calculation that, rather than assuming risk by playing in a small business exchange, it would get small businesses’ employees anyway through the individual market – with employees financing their own health care and getting their own tax deductions.
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Attorney Brendan Williams is a long-term care advocate, former insurance regulator, and prolific columnist on health care issues. 1 Pub. L. No. 115-97 2 155 CONG. REC. S12783 (Dec. 9, 2009) (statement of Sen. Baucus). 3 155 CONG. REC. S13811 (Dec. 23, 2009) (statement of Sen. Bond).