Small business exchange offline and off target
California has been hailed as national leader in implementing Obamacare, enrolling about 4 million people into Medi-Cal and Covered California since last year.
But when it comes to our health insurance exchange for small businesses – known as SHOP – the Golden State looks tarnished.
Businesses can’t enroll in SHOP online. Commissions to insurance agents have been delayed by months. Not many businesses qualify for the tax credit that is supposed to lure them in.
As a result, only a small percentage of Californians employed by small businesses are getting coverage under the program.
“It’s not going super well,” says David Chase, Small Business Majority’s California director.
Q: You write a lot about Covered California’s individual and family health plans. What about its small business exchange? How is it doing?
A: The Small Business Health Options Program, or SHOP, offers insurance to small businesses with up to 50 full-time employees. (Next year, that will rise to up to 100 full-time equivalent employees.)
One of SHOP’s selling points is that it offers federal tax credits to businesses that have fewer than 25 full-time equivalent employees, pay those employees an average annual salary of less than $50,000 and contribute at least 50 percent toward employee premium costs.
The tax credits are only available for two consecutive years.
So far, just under 2,000 businesses have enrolled, representing about 16,000 employees, according to Covered California’s James Scullary. (Note: SHOP enrollment runs year-round, unlike the limited open-enrollment period for individuals and families.)
Chase estimates there are about 350,000 small businesses in the state that would fit SHOP’s enrollment criteria.
What went wrong?
Shortly after the program debuted, the online SHOP portal was taken offline because it wasn’t working.
Since then, the application process has been entirely paper-based, “which has been the preferred enrollment method traditionally used by insurance agents,” Scullary says.
Not according to Steve Bertino, owner of SRB Inc. Insurance Associates in the Sacramento area. “Here we are in the 21st century and you can’t do anything online,” he laments. Bertino says he wants SHOP to work, “but they do need to meet industry standards.”
(Industry standards, he says, also includes paying agents their commissions in a timely manner, which Covered California has struggled with. Scullary says the agency will be current on its SHOP commissions by April.)
California is among a handful of states that don’t offer online SHOP enrollment, Chase says.
Covered California plans to bring SHOP back online in the future, Scullary says, “but as of this point, we do not have a date.”
Not many employers qualify for the tax credits, and if they do, it’s not enough to make SHOP worth it, says Jason Andrew, owner of Stone Meadow Benefits in Redwood City, an insurance brokerage that works primarily with small businesses.
Out of the hundreds of businesses he has worked with since SHOP debuted, only one has met the “elusive” tax credit criteria, he says.
Unless they qualify for the tax credit, “there’s no compelling reason for small-business owners to go to SHOP on prices, service or technology” because they have other choices off the exchange at the same price, he says.
Such was the case with Patti Turner, co-owner of Janak & Scurfield Canvas in Sacramento, which manufactures canvas and vinyl products. She already offered health insurance to her eight employees before Obamacare kicked in, but briefly considered switching to SHOP.
In the end, she opted to stick with a similar plan from the same health insurer, without SHOP.
In part, she says, she wanted to minimize disruption to her employees, who were happy with their existing health coverage. Plus, her business wouldn’t have qualified for the tax credits, she says.
“You’re only going to get the tax credit for a couple of years anyway,” she adds.
Julie Tobias-Pancoast, co-owner of panCoast pizza in Walnut Creek, qualified for tax credits through SHOP and enrolled, which allowed her to offer health insurance to her full-time employees for the first time.
“It makes it a more desirable place to work,” she says.
She and her husband as well as two employees are currently covered. She’s happy with the plan’s benefits, but will end up receiving less tax credits than she expected.
“It’s a little disillusioning,” she says.
When I asked how she felt about the tax credits lasting only two years, she was taken aback. “Holy mackerel! That’s it?” she asked.
The coming year will be key for SHOP. Last year, Gov. Jerry Brown signed a law, SB 1446, that allows California’s small businesses to keep pre-Obamacare insurance plans through this year, even if they don’t comply with the law’s requirements.
But that ends in 2016, so you can bet that thousands of small businesses will be shopping this fall.
“You can think of the period up until the end of this year as beta testing,” says Micah Weinberg, a health policy expert and president of the Bay Area Council Economic Institute.
If you’re a businesses in the market for health insurance, Chase urges you to get help from an insurance broker, which won’t cost you anything.
“Do your homework,” he says, “and look at all of your options.”
This column has been updated. It originally said Covered California sells the same plans to small businesses as it does to individuals and families. Instead, it offers fewer insurance carriers with somewhat different options. Learn more at www.CoveredCA.com/small-business.
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