Small Businesses Wary on Health Insurance Exchange

By Judith Messina

Jun. 22, 2011

In the three years that Elizabeth Crowell has offered health insurance to employees at her Brooklyn, New York, antiques shops, she’s weathered two rate hikes, of 20 percent and 25 percent, on her Empire Blue Cross plan. She is bracing for renewal in November, when she will learn whether she’s in for another steep increase in 2012.

“It’s the only cost in my business that’s unmanageable,” said Crowell. Last year, she spent $25,500 on coverage for her four-person family and the two full-time employees at her two shops, both called Sterling Place.

Crowell may get some relief from a state health insurance exchange for residents and small companies, the details of which are being hammered out by state officials. The exchange could make buying coverage cheaper and easier, but businesses worry that it could make insurance more affordable for individuals at their expense.

“The bigger focus has been on the individual side of it,” said Vince Ashton, executive director of HealthPass, a New York insurance marketplace for small businesses that is angling to run the exchange.

By January 2014, states must have a health care exchange in place for individuals and small businesses that meets minimum standards under the federal Affordable Care Act. Exchanges will operate as Internet portals that let buyers compare plans.

Finding a format
New York is determining how to structure its exchange. Key matters and questions include naming or creating a governing body to supervise the exchange, and whether that body will vet offerings; if there will be a single exchange for the whole state or several regional ones; and if the small business and individual markets should be merged.

Many New Yorkers support the idea of an exchange but differ on some major points.

A large number of consumer groups, for example, want the exchange to be an active purchaser, negotiating and determining who can sell what. Small businesses, on the other hand, want flexibility and the widest possible choice, and largely oppose the active-purchaser role.

“We think it will limit choice and competition,” says Margaret Moree, director of federal affairs for the Business Council of New York State.

The only decision New York must make now concerns the governing body. It lags other states, 20 of which have enacted legislation or have it in the works. A decision was scheduled to be made by the Legislature by June 20, the end of its session, in order for New York to be eligible for millions in federal grants to help establish the marketplace.

The pace is likely to pick up since New York Gov. Andrew Cuomo and the state Senate released versions of the proposed legislation in mid-June. The governor’s version is silent on whether the exchange will be an active procurer, and calls for further study on a merger of the individual and small business markets. The Senate plan prohibits joining these markets.

Higher premiums for business?
Business advocates are also concerned that merging markets would ultimately drive many small firms out of the health insurance market. According to experts, enlarging the insured pool to include more of the chronically ill would lower costs for individuals but could lead to higher premiums for businesses.

Whatever form the exchange takes, it has to do one thing for business owners such as Crowell—bend the cost curve downward.

“If you have a cost to a business that jumps 20 percent to 25 percent a year, it’s unsustainable,” she said.

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