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Life Health > Life Insurance

PPACA small-group exchange program fights for life

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Benefits brokers once expressed some fear about what the Small Business Health Options Program (SHOP) exchanges could do to their market.

See also: PPACA: Will Exchanges Be Producers?

The drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) seemed to think that brokers were mostly a waste of money, in the group market as well as the individual market, and that putting a little regulatory elbow grease here and a little federal money could soon give garage owners and restaurants a chance to set up 30-life group plans all on their own.

Brokers defended their value in interviews. Managers of some state-based exchange programs, and the exchange program at the U.S. Department of Health and Human Services (HHS), eventually began to send signals of interest in making peace with brokers, and even of interest in taking brokers’ advice, but they showed less interest in paying brokers.

But there was some sense that brokers might just be whistling on their way to the graveyard, and that, this time, the customers really would figure out how to buy health plans online.

See also: Mapping the PPACA world for agents and brokers

Instead, the exchange program builders seem to have followed the path that insurers and Web brokers made in the early days of the Web.

The first Web-based insurance sellers went from making grand predictions about displacing brick-and-mortar brokers in the mid-1990s, to responding to reality by shifting to connecting insurers with brick-and-mortar brokers, rather than with consumers, or to setting up big call center operations to supplement their Web sites.

Similarly, the exchange builders started with visions of paperless, human-less group sales websites in 2010 to a realization around 2013 that any group plan sales they made would probably come in through brokers, on paper.

For a look at how the new, humbled SHOP exchange system has done since then, read on.

Angry baby

1. Sales have been miserable.

HHS has been notoriously reluctant to release any numbers hinting at how many employers or workers might be using SHOP plans in the states with HHS-run exchange programs.

See also: Collins: Where’s the PPACA group plan enrollment data?

Charles Gaba has estimated at his blog that the few SHOP exchanges for which enrollment data is available, either through exchange managers or insurance regulators, might have a total of about confirmed 72,000 SHOP plan enrollees. Based on those figures, he estimates SHOP exchanges throughout the country might be providing coverage for about 330,000 people.

Christopher Koller, president of the Milbank Memorial Fund, recently provided a SHOP exchange enrollment summary in written testimony submitted for a state legislature hearing in Hawaii.

Koller compared the bits of SHOP enrollment data he could find with estimates of the size of each state’s small group market and found that even many of the SHOP exchanges that provided enrollment data had captured less than 0.5 percent of the market.

Even in Vermont, which tried to give its state exchange an absolute advantage, by requiring all small-group sales to pass through its SHOP exchange, the SHOP exchange had captured only about half of the small-group market.

Managers at the state-based exchange in Colorado, Connect for Health Colorado, observed in a report on its SHOP program, that all state-based and HHS-run exchanges “are under enrollment targets” in the SHOP market and are “developing sales and functionality improvement strategies.” 

CLARIFICATION: An earlier version of this story gave an incomplete description of Charles Gaba’s views on the number of SHOP covered lives. He believes the nationwide total is about 330,000.


2. Some of the state-based exchanges that hope they still have a shot at getting their SHOP divisions to work are saying that even expecting to get the divisions on track in 2016 may be unrealistic.

Connect for Health Colorado has had an unusually successful, transparent SHOP exchange.

Managers there have succeeded at selling coverage to employers that cover about 3,700 people, or about 1.4 percent of the people in the state’s small-group market.

But, even in the Mile High state, Colorado exchange managers said, “Current costs outweigh benefits.” Managers there are thinking about cutting costs by giving up on handling sales site technology and shifting to putting its brand on some other organization’s system through a “white label” arrangement.

The exchange depends heavily on brokers: Brokers are handling 65 percent of the SHOP employers and 79 percent of the covered lives.

But the systems supporting brokers are still weak, and “brokers who tried SHOP and left in 2014 have not returned,” exchange managers said.

Exchange managers said brokers have told them that, if the exchange could set up a better system, brokers would come in droves.

If the exchange system improves its systems, it might be able to attract employers with 51 to 100 employees in 2016, but insurers are now offering early-renewal programs and 15-month policies to keep the large small-group customers, exchange managers said. Because of the insurers’ retention strategies, “2017 is a more likely period to gain significant” sales to the larger small groups, exchange managers said.

In the large small-group market, 95 percent of the employers have brokers, and adding more brokers will be critical to gaining credibility, exchange managers said.

See also: Colorado firm on PPACA compliance

3. The team does not sound joyous.

Officials at the Centers for Medicare & Medicaid Services (CMS) recently conducted a Web-based seminar about the technical nuts and bolts underlying HHS exchange SHOP enrollment transactions.

The officials included the following frequently asked question (FAQ): “Will the Centers for Medicare and Medicaid Services (CMS) conduct a new issuer webinar series and support new issuer testing for the 2017 plan year?”

CMS gave the following seemingly lukewarm answer: “CMS has not yet made resource decisions for the 2017 plan year. Depending on the number of new issuers considering SHOP for the 2017 plan year, CMS may make appropriate resources available.”

See also: View: What does Obamacare look like over the long run?


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