Friday, November 9, 2012

DC’s Health Exchange: A Good Deal for Small Businesses

DCFPI's Wes Rivers contributes today's health post, part of National Health Blog Post Month (#NHBPM).
DC has been a leader in health care reform, subscribing to the belief that having healthy residents leads to healthy outcomes in other areas such as school performance and work participation. Recently, the board in charge of local implementation of federal health reform—known as the Affordable Care Act or Obamacare—made some key decisions about insurance options in DC.

While a few small businesses have expressed concerns about these decisions, the board’s actions may actually improve benefits for small businesses and their employees.

Starting in 2014, the District’s health benefits exchange will be the sole marketplace for health insurance plans purchased by individuals and small businesses with fewer than 50 employees. Keep in mind, under the Affordable Care Act, these types of small businesses are exempt from the so-called "employer mandate" to provide insurance, but this decision will be good for these businesses and workers for several reasons. First, the exchange combines risk pools, meaning insurers will no longer differentiate between small businesses and individuals when calculating premiums. Also, District regulators will set minimum quality standards for all insurance products sold on the exchange – such as providing an adequate number of physicians and offering plans that meet higher levels of need—so we can all count on an expected level of care.

Some small businesses have questioned whether mandating this level of care may be too limiting and hurt their bottom line, but the concerns often ignore key provisions that also help businesses and their employees. Here’s why the District’s decision is a good move.

Reason #1: Choice for the sake of choice does not necessarily give small businesses and employees better, more affordable health care.
Some small businesses have expressed concern that limiting choice to the exchange and its minimum quality standards will reduce plan options for small employers and raise costs. In reality, the current insurance market provides small businesses with very few choices. The entire purpose of the District’s exchange is to provide individuals and small employers with a robust selection of quality and affordable plans. By making the health exchange the sole marketplace for insurance, insurers will have to play by the same rules and truly compete for consumers. Such competition will lead to more choice and hopefully lower costs. The minimum quality standards should ensure that the choices available to small businesses actually provide essential services and adequate options among doctors and specialists.

Reason #2: Small employers will be able to keep a long-term, trusted insurance plan if they feel it is best for their business and employees.
Even though all new insurance sold must go through the exchange, it is expected that the same types of insurance products that exist today will exist on the exchange. With that said, the Affordable Care Act also allows small businesses to keep or "grandfather" their current plans if they were purchased before March 2010 and do not change premiums or coverage drastically. While businesses can keep true long-term plans, it is expected that many businesses will opt for other plans on the exchange due to incentives or a better deal.

Reason #3: Combining risk pools in the end should keep health insurance affordable.
Early estimates indicate that District small employers will see a slight increase in premiums, perhaps three percent. However, combining risk pools will help stabilize the highly variable year-to-year changes in premium costs, making them more modest and predicable. Moreover, through the first couple of years, most small businesses with fewer than 25 employees will be eligible for tax credits that cover up to 50 percent of their premium costs. This will help tremendously with small business operating expenses.

Overall, the design of the DC health exchange and provisions of the Affordable Care Act should alleviate many of the fears in the small business community. The District kept employers in mind when they designed the exchange: Help small businesses get more for what they pay and ensure plans on the exchange produce a healthier and more productive workforce.

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