States Opt Out of SHOP Employee Choice in Droves

18 states were given permission to opt out of SHOP’s employee-choice provision after determining it would produce adverse selection.

INN Breaking News, July 15, 2014

Bruce Shutan

Is the Small Business Health Options Program overpromising and under-delivering? Recent developments suggest that a growing number of states are proceeding with caution over a key provision that pinned high hopes on broader choices being offered to plan participants.

The Centers for Medicare and Medicaid Services is allowing insurance commissioners in states that are part of the federally facilitated marketplace to opt out of SHOP’s employee-choice provision for 2015 if they determine that it would produce adverse selection. So far, 18 states were given permission to do so.

The final rule also gives states broad authority to request a one-year delay in implementing employee choice options from the four standard metal tiers in the federal SHOP exchange. Several state-run exchanges are already considering postponing this function in 2015 on the heels of California’s decision to punt rather than play. Unless there’s a change in policy, all FFM states are expected to see employee choice implemented in 2016.

The message is clear, according to one industry insider. Various SHOP delays give the impression that the program represents “an afterthought and small businesses are low on the priority list” relative to individual-market exchanges, Kevin Kuhlman, an analyst with the National Federation of Independent Business, told Fox News.

The rationale for delaying employee choice is clearly based on what transpired during the first HIX open enrollment. Concern is mounting among the 32 states under the FFM umbrella about implementation of employee-choice functionality in the SHOP exchange when the government was unable to operate a simple employer-choice model in 2014, according to the National Association of Insurance Commissioners. The group notes that the employee-choice provision raises considerable challenges for the exchange and carriers, as well as employers and employees.

“Employee choice has been one of the principle justifications for having SHOP exchanges, and postponing it another year will in all likelihood impede enrollment growth for 2015,” Timothy Jost, a law professor at Washington and Lee University, recently wrote in the Health Affairs Blog. “On the other hand, the state decisions will give CMS another year to improve the functioning of the federal SHOP exchange and might strengthen it going forward.”

FFM states that will stick with a single health and dental plan option through the SHOP exchange and not offer the employee-choice provision in 2015 include Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, and West Virginia.

Employers in 14 states will have both options available to them during the upcoming HIX open-enrollment season. They include Arkansas, Florida, Georgia, Indiana, Iowa, Missouri, Nebraska, North Dakota, Ohio, Tennessee, Texas, Virginia, Wisconsin and Wyoming.

Shutan is a Los Angeles freelance writer.

This story originally appeared on Health Insurance Exchange

      

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