Obamacare's small-business exchanges have largely been a bust in their first year of operations. In the 18 states and the District of Columbia that operated their own marketplaces for employers with fewer than 50 workers, only 76,000 individuals from fewer than 12,000 businesses signed up as of the beginning of June, according to a report (PDF) issued by the Government Accountability Office.
The CMS has not released any enrollment figures for the 33 states that relied on the federal small-business exchange. But agency officials indicated to GAO researchers that they did not expect to report significantly different enrollment trends from the state-based marketplaces.
That means the fledgling exchanges will almost certainly fall well short of the 2 million enrollments for 2014 predicted by the Congressional Budget Office. In four states—Maryland, Mississippi, Nevada and Washington—fewer than 100 individuals obtained coverage through their Small Business Health Options Programs (SHOPs) through May. Six other states had fewer than 1,000 enrollees.
The one notable success story was Vermont, which logged nearly 34,000 enrollments. That was likely because the state required that all small-group plans be offered only through the state's exchange.
Matthew Buettgens, a senior research analyst at the Urban Institute, said he isn't surprised by the slow pace of enrollments. He noted that Utah established its small-business exchange in 2010 and is still struggling to attract significant enrollment.
“They've had more than four years of marketing and promoting this exchange,” Buettgens said. “Even after all that time and all those resources, you're still only talking about 11,000 covered lives.”
But the struggles for many exchanges in 2014 were compounded by missteps, the GAO report found. Most SHOPs weren't able to handle online applications during the first year of operations, relying instead on labor-intensive manual enrollments. In addition, few had the capability to offer employees more than one plan to choose from, which is supposed to be one of the main attractions for businesses to use the exchanges.
Signups were also diminished by the Obama administration's decision to allow plans that don't comply with the coverage requirements of the Patient Protection and Affordable Care Act to be renewed, thus reducing the potential customer base. In addition, there was a lack of awareness about the SHOP exchanges as most of the emphasis in marketing and media campaigns was on the non-group exchanges.
And there are more systemic problems that the SHOP exchanges will face going forward. The marketplaces offer tax credits to businesses as an enticement, but the credits are meager, complicated to administer and last only for two years, the GAO report pointed out.
“A lot of what we're hearing from both brokers and small firms is basically you've got to hire an accountant to figure out if you're eligible for the credit or not,” Buettgens said. “So that is a real problem.”
Private exchanges, meanwhile, will present increased competition for the SHOP marketplaces in the coming years, Buettgens said. Those competitors can offer additional services that could prove attractive to small businesses, such as other insurance products or human resources expertise.
“If you've got a competitor that can do that and you can't, then you've got a problem,” Buettgens said.
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