• Health Reform Bill (III): Small Business Health Option Programs ("Shop Exchanges")
  • April 23, 2010
  • Law Firm: Holland & Hart LLP - Denver Office
  • Back in the 1980’s the State of Hawaii developed a health insurance exchange for businesses located in the islands.  A core feature of the Massachusetts Health Plan (“Romneycare”??) installed several years ago was the installation of the Massachusetts Health Care Connector,  a state operated healthcare insurance exchange for small businesses and uninsured citizens looking for reasonably priced health insurance. Health Care Connector is the model for the Small Business Health Option Programs or SHOP Exchanges mandated by the Patient Protection and Affordability Act of 2009. The mission of the exchanges is to “assist qualified small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market of the state.” The states are required to have the exchanges in place by January of 2014.  The regulators from the Department of Health and Human Services  (“HHS”) will define who are qualified employers and what are qualified plans.

    If a state does not have an exchange up and running on time, the Department of HHS will create and maintain an exchange for the state. The state exchange will be required to be a non-profit or a governmental entity. The Connector is an independent state agency in Massachusetts. The idea is to health small business employees and the uninsured shop for insurance coverage. The Congressional Budget Office estimates that the exchanges will reduce insurance administrative costs by 5 percent and permit small employers to band together for purchasing power to lower costs of premiums. In 2017 large employers, those over 100 employees will have access to the exchanges.

    Small businesses with 40 or less full time equivalent employees earning less than $25,000.00 per year will be eligible for a tax credit of 35% of the insurance premium costs. Starting in 2014 companies with 50 or more employees will be required to provide insurance coverage or they will be assessed a penalty of $750.00 for each employee. The insurance provided in 2014 will not be affected by pre-existing conditions, although some premiums may vary my geographic location, age and tobacco use. There are approximately approximately 58 million employees in the United States working for small businesses.

    How are things going is Massachusetts these days. The Connector is very busy these days.  It recently rejected 235 out of 274 requested premium increases requested by insurance carriers in the state. The insurance companies sought an injunction in state court granting them the right to increase rates (8% to 32%). The judge denied the request based on the companies” failure to first exhaust their administrative remedies. Most of the insurance companies have not posted their rates to the public and the Connector has set a deadline for tomorrow for them to publish their rates so that insurance can be purchased.  Expect to see more of this ongoing conflict as the states square off against the insurance plans.