Last October, the D.C. Health Benefit Exchange Authority board voted unanimously on a small business mandate that requires individuals covered by the Patient Protection and Affordable Care Act, as well as small businesses not offering health insurance as of Dec. 31, 2013, to buy coverage exclusively through the D.C. exchange. Small businesses that currently offer coverage will be required to use the exchange in 2015. Similarly, Vermont passed a law last year that would require all small businesses with 50 or fewer employees to buy coverage only in that state's public exchange. In 2016, Vermont's definition of small employers will change to businesses with 100 or fewer employees.
In a letter to HHS Kathleen Sebelius (PDF), the GOP congressmen contend that the requirements in D.C. and Vermont are inconsistent with the principles of consumer choice and competition. They also say the mandates contradict provisions laid out in the ACA. They've asked for HHS to provide the committee with all documents related to any state's plan or proposal that would restrict or prohibit buying coverage outside the public exchange.
“Based upon a straightforward reading of the statute, plans by D.C. and Vermont to restrict access to the insurance market outside the exchange violate the principle of voluntary participation in exchanges that was codified in PPACA and reaffirmed in your guidance when you wrote that 'participation in a SHOP (exchange) is strictly voluntary for small employers,' ” the letter noted. SHOP refers to the Small Business Health Options Program (PDF).
Under the ACA, however, states are given considerable discretion in how they implement the exchanges and regulate their health insurance market. For instance, states have the option of limiting the SHOP exchanges to employers with less than 50 full-time workers, or they can allow firms with up to 100 employees to participate. During the congressional debate preceding the ACA's passage, Republicans had pressed for maximum state flexibility.
The issue of size is a leading factor in D.C. and Vermont's decisions, according to Joel Ario, managing director of health policy solutions at the consulting firm Manatt, Phelps & Phillips. When the health reform law bill passed, Ario explained, some had suggested that 50,000 to 100,000 lives would be a normal number in the exchanges; smaller states are concerned about having sufficient scale. Insurance pools must have sufficient size to ensure an optimal mix of health risk among members.
“In both cases, you're dealing with a similar environment: a small geographical area with a small population so you have more trouble getting the exchange to a scale where it can operate most effectively,” said Ario, who was Pennsylvania's insurance commissioner from 2007 until 2010 before he served as director of HHS' Office of Health Insurance Exchanges. “That's a lot of what's driving this.” Another factor could be that tax subsidies for individuals to induce them to buy coverage are more substantial than those for small employers, so there is less incentive for employers to enter the small group exchange, Ario added.
In addition, in a number of states, few insurers have opted to participate in the SHOP exchange, while there have been a larger number of insurers participating in the individual exchanges.
Ario said he hopes that HHS continues to follow the provisions of the law while still granting maximum flexibility to the states. Issa “should speak to officials in D.C. and Vermont about their situation but ought not to get the federal government to override local officials,” Ario said.
Issa, Jordan and Lankford sent similar letters to Mark Larson, commissioner of the Department of Vermont Health Access, which manages the state's public health programs, and to Mila Kofman, executive director of the D.C. Health Benefit Exchange Authority that asked for information related to their requirements.
The lawmakers have asked all of the departments to send information to the committee by no later than July 12.
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