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Insurance exchanges could enable smaller employers to shop for a wider range of coverage choices – or help them bargain for better prices from their existing insurers.
David Rosenbaum, CFO.com | US
June 29, 2012
"It's moot," says Pingup CFO Bethe Palmer when asked about the impact on her small technology start-up of today's Supreme Court decision to uphold the constitutionality of the Patient Protection and Affordable Care Act, which requires businesses with more than 50 employees to provide health insurance for their employees and mandates that all individuals have coverage. Why? Because Pingup, which has created a platform to allow customers to communicate with businesses by texting, rather than by telephoning or e-mailing, is based in Massachusetts, which already has those requirements and the penalties to back them up.
The individual mandate was widely considered the linchpin of President Obama's health-care reform initiative, and the element most likely to be overturned by the court. But Chief Justice John Roberts's majority decision interpreted the mandate to purchase insurance - and the penalty that enforced it - as a tax that was within Congress's authority to levy, not as a part of commerce, which the Administration argued was Congress's job to regulate.
Today's decision will at the very least begin to force small businesses to start defining their benefit strategies, says Dean Hatfield, senior vice president and health practice leader of The Segal Co., a benefits and human-resources consultancy. "I think a lot of people on the small business side were thinking the whole [law] would be repealed, so there was a lull," he says.
Some small businesses, Hatfield says, may wait until the upcoming election (Republican Presidential candidate Mitt Romney has promised to repeal the law "on my first day if elected President of the United States"), but he cautions "that you can't stand still while the world moves around you." Indeed, Hatfield sees the new law as an opportunity for small businesses.
"Most small employers are looking to recruit and retain quality employees," he says, and the law provides a way to offer employees a wider choice of benefit options through the insurance exchanges the law requires the states to create. "At the very least," says Hatfield, "even if the company is not using the state exchange [to shop for insurance], the employer can use it to negotiate with insurance providers for lower premiums. You look on the exchange and say to your insurer, 'I can get a better deal on the state exchange.'"
Vince Ashton, president and chief executive officer of HealthPass New York, a private health-insurance exchange that was formed in 1999, echoes Hatfield's sentiment that states that don't move expeditiously to create an insurance exchange, perhaps waiting for a possible repeal of the PPACA, run the risk of having the federal government step in to do it for them. And "the federal government," says Ashton, "does not have the ability to tailor exchanges for each state," so states that don't act by the January 1, 2013, deadline, he warns, will get a suboptimal 'one-size-fits-all' exchange.
Ashton does not, however, believe the PPACA fixes everything. "We have a broken system," he says. "This is really insurance reform. There are things that need to be done to improve quality and affordability. There has to be delivery-system reform so that doctor and hospital payments are based on quality, on outcomes, not quantity."
While not arguing that the law solves the country's health-care problem, Rhett Buttle, government affairs director of Small Business Majority, a small-business advocacy group, does believe it begins to "level the playing field" for small and big businesses. Exchanges, he says, "allow small businesses to band together and be competitive with benefits. Small businesses couldn't afford to offer their employees much choice. If they offered coverage at all, they said, 'Here's our health plan, take it or leave it.' Now they can offer more choice, and that helps them recruit and retain."
Another benefit, Buttle says, is that heretofore people were tied to their jobs because they needed the insurance they provided. "Now," he says, "people can go out and start small businesses, as they have the option to buy affordable health care."
Buttle buttresses his argument with results from a recent poll conducted by the Small Business Majority of 800 small-business owners with 100 or fewer employees in Florida, Illinois, Louisiana, Michigan, Missouri, Texas, and Virginia. It found that 66% of small-business owners said they would either use or consider using their state exchanges to purchase insurance, and 54% of qualified business owners said they were already taking advantage of the law's small-business health-care tax credit.
In stark contrast, a May General Accounting Office report said that fewer small employers claimed the credit in 2010 than were eligible for it. According to the report, only 170,300 small employers claimed it out of a potential pool estimated to be 1.4 million to 4 million. In 2014 the maximum credit will rise to 50% of the employers' contribution from the current 35%.
Not all small-business organizations share Small Business Majority's enthusiasm for the PPACA. In a statement today, Dan Danner, president and CEO of the National Federation of Independent Business, which was one of the parties that brought suit to bring down the individual mandate and the expansion of Medicare provisions in the act, described the individual-mandate portion of the act as "a tax on all Americans," and promised to continue fighting for its repeal.
Pingup presently does not offer insurance for its 5 full-time employees. Massachusetts law sets the bar for requiring an employer to offer a group health plan at 11, and Palmer expects Pingup to "trip over that requirement very soon." And when it does, she says, "We will file for all credits that we can legally claim."