Spreading confusion about SHOP exchanges

'Doomsters' grasp at opportunity to predict Obamacare's demise

  • By
  • healthinsurance.org Contributor
  • April 11, 2013

In the past, I have reported on misinformation about healthcare reform going viral. It has happened again, and this time, reform’s critics have outdone themselves.

In March, the Obama administration proposed revising the rules governing insurance marketplaces or “exchanges” where small business owners will be able to pool their buying power, and purchase affordable, high quality insurance for their employees. The change to the rules is small, and it is temporary.

Nevertheless, Obamacare’s critics pounced, and soon began distorting what the administration said. USA Today quoted the Chamber of Commerce (long a foe of reform), claiming that the small business exchanges “will be of little or no value to employers, or by extension, their employees.”

How small business exchanges lower premiums

Before considering the charges, let’s review what the health reform law’s Small Business Health Options (SHOP) exchanges offer. Today, insurers charge small companies 18 percent more because the administrative costs of hand-selling policies to small groups are high.

But in the SHOP Exchanges, small businesses automatically become part of large groups. Some will qualify for tax credits.  The Congressional Budget Office (CBO) estimates premiums will fall by 2 percent to 11 percent. Meanwhile those premiums will buy far better coverage. (Policies sold in the SHOP Exchanges will have to meet the high standards set for plans in the individual exchanges).

The proposed change: What the administration actually said

Now consider the proposed change. Originally, the Affordable Care Act called for opening SHOP exchanges to employees in 2014. First, the employer would choose a tier of insurance. (Bronze, Silver, Gold or Platinum tiers will pay 60 percent to 90 percent of an average group’s covered benefits, with any individual’s out-of-pocket spending capped at roughly $6,000.) Employees would then pick plans from that tier.

But Washington had assumed that states would be eager to help their small businesses by setting up exchanges. Today, only 16 states and the District of Columbia have begun. Now the administration realizes it will need more time to set up the IT that millions of employees will need to navigate exchanges in 34 states.

HHS still plans to open the exchanges in 2014, but only to employers. They will survey the many plans available, and then pick one for their employees. “Employee Choice” will be delayed – but just for one year. And the postponement will apply only to the 34 states that have not set up exchanges. In 2014, the other 16 state and D.C. can open exchanges to employees.

“Nearly 40% of small businesses in this country do business in the 17 states implementing their own exchanges,” observes John Arensmeyer, president of Small Business Majority (SBM), a non-profit advocacy group. And “starting next year, small employers will still be able to pool their buying power in the exchanges, giving them the kind of clout large businesses currently enjoy.”

“This is not a failure, it’s a bump in the road,” Small Business Majority’s Rhett Buttle told me.

The attack begins

Nevertheless, Robert Laszewski, a long-time health reform critic, jumped on the bump, telling Modern HealthCare: “Offering a single employer all of the exchange options is a complex undertaking …” and “… a delay means that the exchange isn’t going to offer any advantage over the employer simply staying with their existing insurer.”

Laszewski suggests that “a single employer” will not be able to choose from “all of the exchange options.” This is not true. Business owners will choose from all plans in the exchange. As for an employer keeping his “existing” coverage – why would he do that? The policies in the exchanges will offer better coverage for less.

But Laszewski is a spokesman for insurers. Some hate the exchanges because they know that, under rules that protect patients, profits will be squeezed.

Soon, Obama’s critics began to exaggerate the bad news. TIME’s Joe Klein headlined his column: “Obamacare Incompetence.” He wrote: “The Obama Administration has announced that it won’t have the exchanges ready in time, that small businesses will be offered one choice … for a year, at least.” [my emphasis]

“People are being opportunistic, exaggerating the impact of delay to score political points,” Patrick Cannon, VP of Wendell Potter Consulting told me. “The optics are not good,” he acknowledged. “Any delay makes it look like the administration isn’t doing a good enough job. But it’s the state’s intransigence, not Washington’s incompetence that leaves the administration setting this up in 33 states – a tall order.”

The Wall Street Journal publishes a correction

The Wall Street Journal usually get its facts right. But it was misled by Obamacare’s opponents. “A major selling point of the 2010 Affordable Care Act was its pledge to help lower health-care costs for small businesses by letting them shop in exchanges that offered more plan choices,” the Journal reported. “The broader pool of options theoretically would increase competition among insurers and attract more plan participants, thus resulting in lower insurance premiums.”

To its great credit, the Journal later ran a correction: “An earlier version of this article incorrectly suggested that businesses wouldn’t be able to pick from a range of insurance plans in the first year of the small-business exchange operation.”

Neither TIME nor Joe Klein corrected Klein’s column. Thus misinformation spread. Google Klein’s headline: more than 40 media outlets quoted it. Fox News was at the top of the list.

WonkBlog was the exception. Hat-tip to Sarah Kliff: Three days after Klein spouted off, her column appeared: “Calm down, Joe Klein: Reports of the small business exchange’s death are greatly exaggerated.”

WonkBlog is widely read, but Kliff’s column received far less attention than Klein’s. It just didn’t have the propaganda value.

Do we exaggerate the importance of “consumer choice”?

Many are upset that employees won’t be selecting their own plans next year. I’m not convinced. Consumers often make bad choices – whether picking a stock, a mortgage or an insurance policy. Someone who has built a small business might be better able to compare insurance contracts than a 25-year-old employee.

Linda Bergthold, a healthinsurance.org contributor and healthcare expert agrees: “The importance of consumer choice is way overblown and small businesses are better at bargaining than individuals.”

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