I don't know how insurers celebrated when the feds announced that the public small-business health insurance marketplace wasn't going to allow employees their choice of plans until 2015, but I envision galas, fetes, maybe even shindigs.
Insurers, you see, have been working frantically on their own exchanges, in which the employer's ability to offer a set amount toward insurance and let employees choose the particulars will be a key selling point. It's not hard to see why. Defined-contribution plans make employees more aware of both how much the employer contributes and how much coverage costs, they give employees more control — and they deftly switch the mantle of responsibility for covering future increases from employers to employees. If the market does experience massive upheaval in the coming year (House Democrats are saying no, at least in some states), I bet those are going to look like pretty attractive attributes.
But anyway, these exchanges will be competing not only against each other, but also against the feds' SHOP marketplaces, which will be dangling the exclusive offer possibility of a Small Business Health Care Tax Credit of up to 50 percent for businesses with fewer than 25 full-time-equivalent employees with average annual wages of less than $50,000.
Tangent One: The nomenclature of the Patient Protection and Affordable Care Act is terrible. It would save me hundreds of words if, for instance, there were specific words associated with business sizes, so I wouldn't have to say "for businesses with fewer than 25 full-time-equivalent employees." But the exchange for small businesses is for those with fewer than 100 employees except in some states like Pennsylvania where it's capped at 49 to start, and then the small-business health care tax credit is — well, you've heard that one enough times. But seriously, we need defined terms. They had enough time to rename the exchanges to "marketplaces," which made no sense and further complicated the subject; then they can do this, which makes loads of sense and would become the first thing I recall that makes PPACA simpler. (Also, please don't let Starbucks anywhere near that process.)
Tangent Two: Speaking of making PPACA simpler, I forgot to mention something last week. In the meeting I blogged about, someone asked about the possibility of getting bipartisan support for raising the definition of full-time above 30 hours or for dropping "equivalent" from the employer mandate calculation and just focusing it on full-time employees. I am not aware of any large-scale movement to either of those ends, but both of them would seem to simplify calculations at the very least, and I am sure business owners would welcome them. However, they would also alter the entire equation that is PPACA — and we know from the Supreme Court's decision on Medicaid expansion how much upheaval that can cause.
So private exchanges are going to be competing against the public marketplaces on small-business accounts, and the public marketplaces are going to be a year late with a key feature. Not too bad a deal for insurers, especially because — well, these new models will be more difficult for companies to implement.
First, they're new. Second, if they do pick a defined-contribution model, you can't just sit everyone down and spend an hour explaining how the one plan works, because they'll all have different ones. Plus, they'll probably be doing their own selecting on the program's website. The feds know it's going to take a lot of help to get people signed up on the marketplaces, and the insurers know it's going to be a job to get people set up on their exchanges, but the price differentials are supposed to be enough to make it worth while. But nobody wants to go through that more than they have to, which means that ceding the field to exchanges on an important point this year has the potential to lose the marketplaces some customers permanently.
• Even in the federal marketplaces, the plans offered for small businesses will be by private insurers, not the feds themselves. You probably knew that, but I'm just making sure.
• The "employees pick their plan" delay is for federally run marketplaces. States that elected to run their own public exchanges can implement it this year if they want to and are able. The feds really wanted states to run their own marketplaces — witness that the necessary funding was supposed to be provided by state grants, and that whole issue of the law itself saying subsidies are for state-run marketplaces and the IRS saying they are for federally run marketplaces too and then ensuing lawsuits. So does the delay count as negative for states that ceded responsibility to the feds? Depends on whether you ask insurers or other small businesses, I think.
Finally, one thing about all of this that you can't argue is that the PPACA has effectively wrought change in the health insurance industry. Whether these changes bring down costs over the long run, we'll see.
On a related note, 8 Components of a Health Care Exchange is a quick and decent overview.