Reports and Research Table of Contents October 24, 2013 Board Meeting

Reports and Research Table of Contents October 24, 2013 Board Meeting Small Employer Perspectives on the Affordable Care Act’s Premiums, SHOP Exchanges, and Self-Insurance – Health Affairs October 16, 2013 Getting the Word Out on Marketplaces: An Analysis of Education and Outreach Efforts Across States’ Health Insurance Marketplaces – KidsWell October 2, 2013 An Introduction to Health in All Policies: A Guide for State and Local Governments – American Public Health Association October 2013 The Employer Mandate of the Patient Protection Affordable Care Act – Alliance for Health Reform & Robert Wood Johnson Foundation October 2013 HHS Proposes Basic Health Program Regulation – Manatt September 30, 2013 Web First By Jon R. Gabel, Heidi Whitmore, Jeremy Pickreign, Jennifer L. Satorius, and Sam Stromberg doi: 10.1377/hlthaff.2013.0861 HEALTH AFFAIRS 32, NO. 11 (2013): – Small Employer Perspectives ©2013 Project HOPE— The People-to-People Health On The Affordable Care Act’s Foundation, Inc. Premiums, SHOP Exchanges, And Self-Insurance Jon R. Gabel (Gabel-Jon@ ABSTRACT Beginning January 1, 2014, small businesses having no more NORC.org) is senior fellow at than fifty full-time-equivalent workers will be able to obtain health NORC at the University of Chicago, in Bethesda, insurance for their employees through Small Business Health Options Maryland. Program (SHOP) exchanges in every state. Although the Affordable Care Heidi Whitmore is a senior Act intended the exchanges to make the purchasing of insurance more research scientist at NORC at attractive and affordable to small businesses, it is not yet known how the University of Chicago, in Dayton, Minnesota. they will respond to the exchanges. Based on a telephone survey of 604 randomly selected private firms having 3–50 employees, we found that Jeremy Pickreign is a senior statistician at NORC at the both firms that offered health coverage and those that did not rated most University of Chicago, in features of SHOP exchanges highly but were also very price sensitive. Albany, New York. More than 92 percent of nonoffering small firms said that if they were to Jennifer L. Satorius is a offer coverage, it would be “very” or “somewhat” important to them that senior research analyst at NORC at the University of premium costs be less than they are today. Eighty percent of offering Chicago, in Chicago, Illinois. firms use brokers who commonly perform functions of benefit — Sam Stromberg is a research managers functions that the SHOP exchanges may assume. Twenty-six analystatNORCatthe percent of firms using brokers reported discussing self-insuring with University of Chicago, in Bethesda. their brokers. An increase in the number of self-insured small employers could pose a threat to SHOP exchanges and other small-group insurance reforms. mall employers are generally defined costs are tied to the health status of a smaller as firms with three to fifty full-time- number of employees), volatile pricing (with equivalent workers. In the United premium costs that can vary substantially from States more than 2.9 million small year to year), and the offering of lower-value firms employ about 29.5 million products (in which premiums are high relative Sworkers, or about 25.4 percent of employed to the financial protection that they provide). Americans. These firms could obtain health in- Competition among insurers in the small-group surance coverage for their employees in the market depends heavily on insurers’ skill in small-group insurance market.1 medical underwriting—a logical consequence It is generally recognized that the small-group of spreading catastrophic costs among a few em- market does not perform as well for its custom- ployees in a small firm. ers as the insurance markets for midsize and To improve the performance of the small- large groups do for theirs.2 There are a variety group market, the Affordable Care Act made mul- of reasons for the worse performance of the tiple changes in the rules for the insurance mar- small-group market, including its higher admin- ketplace. An overarching aim of these reforms is istrative costs, rigorous medical underwriting to alter the small-group market so that insurers (because coverage availability and premium in it no longer compete on skill in medical un- NOVEMBER 2013 32:11 Health Affairs 1 Web First derwriting but on price and quality. Policy mak- Affordable Care Act are intended to make it easi- ers anticipated that a reformed market would er for small businesses to obtain health insur- improve access to insurance, better control the ance coverage for their employees, it is not yet growth in the cost of coverage, and improve the clear how these companies will respond to the quality of care. exchanges. To get a better idea of their interests The Affordable Care Act’s small-group reforms and expectations, we first examine the state of are too numerous to list here. Some of the major the small-group market in 2013, the last year ones are the establishment of the Small Business prior to the act’s near-full implementation. Health Options Program (SHOP) exchanges; an Second, we assess the attributes of health insur- end to medical underwriting based on an indi- ance and features associated with the SHOP ex- vidual’s health status; and the setting of premi- changes that do and do not appeal to small em- ums based only on “community rating,” in which ployers. Third, we examine the impact on small costs can vary only by an individual’s age, geog- employers of aspects of the health care law that raphy, family size, and whether or not he or she are already in effect. smokes. There are also tax credits for companies with high percentages of low-income workers; state-defined essential health benefits required Study Data And Methods of qualified health plans—those plans permitted From January through June 2013, National to offer coverage in the SHOP exchanges; a re- Research LLP conducted telephone interviews quirement that to qualify, plans have an actuarial with benefit managers of private US firms with value of at least 0.6, meaning that the plans must three to fifty employees. Thirty-seven percent of pay out at least 60 percent of covered expenses; the respondents were CEOs, 33 percent office and pooling of small-group plans so that pricing managers, 4 percent executives responsible for and medical loss ratios (the portion of premium human resources, and 7 percent chief financial dollars spent on medical care) are done in the officers; 19 percent had some other position. aggregate rather than for separate plans. The sample frame, obtained from Dun and As of October 1, 2013, companies with fifty Bradstreet, was randomly selected and stratified or fewer full-time-equivalent employees began by firm size, with additional controls for indus- signing up for insurance coverage through the try and geographic location. Of the 604 firms SHOP exchange in their state. Seventeen states whose representatives completed interviews, and the District of Columbia are operating their 434 companies already offered health benefits, own SHOP exchanges, and the remaining ex- and 170 companies did not. changes are being administered by the Depart- The survey instrument included questions for ment of Health and Human Services. Coverage nonoffering firms on why they did not purchase takes effect January 1, 2014. coverage, their experience shopping for it, and SHOP exchanges are electronic marketplaces what would make them more likely to purchase where company managers can obtain informa- it. Offering firms were asked about their pur- tion on each qualified health plan sold in the chasing experience, factors that would improve exchange—including its benefits, premiums, their shopping experience, their views about se- networks, and actuarial value—and sign their lected attributes of the exchanges, how the company up for the plan of their choice. SHOP health care law had affected them thus far, and exchanges will perform administrative functions whether they had considered self-insurance. such as aggregating bills, participating in claims All of our analyses used statistical weights adjudication, and answering questions from based on the inverse of the probability that the consumers. Employers will make a fixed contri- firm would be selected for the survey; this is bution for each employee according to the cost of the firm’s employer weight. Employee-based the base plan and tier—or level of coverage—that weights were the product of the number of work- the employer selects. ers in the firm and the firm’s employer weight. In the “employer model” used by the federally Two additional weights—eligibility-based weight run exchange, the employer chooses one plan, and coverage-based weight—were the products and all employees who take up coverage through of the employee-based weight and the propor- the firm are enrolled in that plan. The “employee tions of eligible and covered workers in the firm, model” used by seventeen of the eighteen state- respectively. Most of the statistics presented in based exchanges has many variations. One com- this article used employer weights. mon element is that if an employee chooses a When calculating standard errors, we use the higher-cost plan than the base plan selected by statistical software SAS Callable SUDAAN, ver- the employer, the employee pays the difference sion 9.2, to adjust for design effects. Differences in premiums out of pocket.3 presented in the text are significant at the Although many of the provisions of the 0.05 level. 2 Health Affairs NOVEMBER 2013 32:11 Study Results Exhibit 1 Cost And Coverage The average monthly pre- Differences In Coverage In Plans For Small Groups And For Midsize And Large Groups, 2013 mium for a single policy among small employers was slightly more than $502 per month, or about Small Midsize and $6,029 per year, in 2013.

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