Many Factors Contribute To Low SHOP Enrollment: GAO

 

After studying the operation of the Small Business Health Options Program (SHOP), the Government Accountability Office (GAO) has found that enrollment is much lower than expected, and several unrelated factors combined to discourage enrollment. It is estimated that 76,000 individuals enrolled in coverage through the 18 state-based SHOPs. The Centers for Medicare and Medicaid Services (CMS) does not have the data on enrollment through the 33 federally facilitated SHOPs (FF SHOPs). The Congressional Budget Office (CBO) originally estimated that 2 million people would enroll in coverage through the SHOPs. Although enrollment could grow in the future, extension, and perhaps expansion, of the small employer tax credit would probably be necessary, according to GAO Report No. GAO-15-58.

Open enrollment. The SHOPs were to open to enroll eligible employees on Oct. 1, 2013, the same day that the individual Health Insurance Exchanges opened. The 33 federally facilitated SHOPs and 14 of the 18 state-based SHOPs were operational, though not all key features were available. The FF SHOPs could not actually accept online enrollment, and employees could not choose among plans.

The state-based SHOPs. Measured in terms of enrollment volume, the success of the state-based SHOPs was highly variable. Vermont’s SHOP was by far the most successful, with nearly 34,000 enrollees from 3,580 employers; Vermont required that all small group policies be offered through the SHOP, however. The Mississippi SHOP, which did not become operational until May 2014, had enrolled one individual as of July 1, 2014. Utah, which had an operational Exchange for small employers before 2014, enrolled 10,900. New York and California both enrolled about 10,000 people through their SHOPs, but no other state enrolled as many as 5,000. Several enrolled fewer than 100.

Factors hindering enrollment. In addition to the issues caused by the lack of complete functionality, the news that some functions of SHOPs were not available caused some people to believe that they had not opened at all. There also was confusion because of the emphasis in the media on the Health Insurance Exchanges targeted to the individual market. It is likely that one important factor, however, was the Administration’s announcement that plans that did not meet the requirements of the Patient Protection and Affordable Care Act (ACA) could be renewed if states allowed it. Small employers may have chosen to renew their familiar, if noncompliant, plans and avoided the possibility of significant premium increases.

Several SHOPs had continuing technical problems that made it difficult for both consumers and insurance professionals to get the help they needed. Stakeholders reported that the continuing difficulty and poor customer service discouraged participation and enrollment in the SHOPs.

Significance of the tax credit. Many employers who enrolled were motivated, at least in part, by the availability of the tax credit. In the states that ran their own SHOPs, the average number of employees per participating employer ranged from 1.6 to 8.3; the GAO believed that these numbers support the conclusion that employers were motivated by the tax credit, which was available to employers of fewer than 25 employees. Some stakeholders reported that the tax credit was too small and too complicated. Currently, the credit is available only for the first two years that an employer participates in the SHOP. The temporary nature of the credit may be a disincentive to participation.

Factors that may affect the future of SHOPs. To the extent that the GAO examined and compared premiums for SHOP plans with those for small group plans outside the SHOP, it found that the cost was comparable. If there is no cost advantage, and the tax credit disappears after two years, there may be little reason for employers to choose the SHOP. More robust participation by insurance issuers and improved working relationships with agents and brokers could encourage enrollment in SHOPs, however. In states where private Exchanges operate, they compete directly with SHOPs. Some employers also may be considering referring their employees to the individual market Health Insurance Exchanges.

For more information, visit http://www.gao.gov/products/GAO-15-58.

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