United States Government Accountability Office
Highlights of GAO-15-58, a report to the
Chairman, Committee on Small Business,
House of Representatives
November 2014
SMALL BUSINESS HEALTH INSURANCE
EXCHANGES
Low Initial Enrollment Likely due to Multiple, Evolving
Factors
Why GAO Did This Study
The Patient Protection and Affordable
Care Act required SHOPs—
exchanges, or marketplaces, where
small employers can shop for health
coverage for their employees—to be
established in all states. States may
elect to establish and operate SHOPs
themselves or allow CMS to do so
within the state. Enrollment in SHOPs
was to begin in October 2013, with
coverage effective as early as January
2014. GAO was asked to examine the
early implementation experiences of
the SHOPs.
In this report GAO describes (1) SHOP
functionality, enrollment, plan
availability, and premiums and
(2) stakeholders’ views on key factors
that have affected current SHOP
enrollment or may affect future
enrollment growth. GAO reviewed
relevant information from CMS and
states, including data on employer and
employee enrollment, plan availability,
and premiums generally through
June 1, 2014. GAO also interviewed
representatives of key stakeholders
that operate SHOPs (CMS and states),
offer coverage in SHOPs (health
insurance issuers), obtain coverage
through SHOPs (small employers), or
assist in obtaining coverage through
SHOPs (agents and brokers) on a
national basis and, for certain
stakeholders, in five states—California,
Illinois, Kentucky, Rhode Island, and
Texas. The five states were selected
based on factors including varied
issuer participation levels and SHOP
functionality. The experiences of these
stakeholders cannot be generalized to
other states or stakeholders.
GAO incorporated HHS comments on
a draft of this report as appropriate.
What GAO Found
Though all of the Small Business Health Options Programs (SHOPs) required by
the Patient Protection and Affordable Care Act were operational, many features
were not yet available and enrollment was low as of June 2014. According to the
Centers for Medicare & Medicaid Services (CMS), the agency that oversees the
SHOPs, all 33 of the SHOPs run by CMS (federally facilitated, or FF-SHOPs)
and 14 of the 18 SHOPs run by states (state-based, or SB-SHOPs) were
accepting enrollment applications as of the October 1, 2013, deadline. The
remaining 4 SB-SHOPs became operational by the following May. Websites
where employers could review plan information such as premiums and benefits
were available on October 1, 2013, for all FF-SHOPs and most SB-SHOPs.
Other key SHOP features—online enrollment and employee choice, the ability for
employees to choose among multiple plans—were delayed for all FF-SHOPs, but
available for most of the SB-SHOPs. CMS is currently preparing to implement
online enrollment for all FF-SHOPs and employee choice for many of the FF-
SHOPs for 2015. Based on official estimates and stakeholders’ expectations,
enrollment for the SB-SHOPs has been significantly lower than expected. The 18
SB-SHOPs had enrolled about 76,000 individuals—including employees, their
spouses, and dependent children—in plans purchased through nearly 12,000
small employers, as of June 1, 2014, for most states. Enrollment data for the FF-
SHOPs was not yet available, although CMS was in the process of collecting the
data from issuers and expected to have complete data by early 2015. However,
CMS officials said they do not expect major differences in enrollment trends for
2014 between SB-SHOPs and FF-SHOPs. Finally, most SHOPs had multiple
plans available in each county, although a small number of states had counties
with no plans available. Premiums for SHOP plans varied across states and were
generally comparable to premiums for other small group plans offered within a
state but outside of the SHOP.
Stakeholders identified several factors that may have led to current low SHOP
enrollment and that may affect future enrollment growth. Many stakeholders
reported that the primary incentive for employers to use the SHOPs has been the
small business tax credit available to eligible employers who offer coverage
through a SHOP, although some noted that the credit may be too small and
administratively complex to motivate many employers to enroll. Other factors
identified that may have hindered current enrollment include the ability of
employers to renew plans that existed before the SHOPs—which, depending on
state requirements, is permitted until October 1, 2016—and employer
misconceptions about SHOP availability. Stakeholders also described factors
that may help stimulate or detract from future SHOP enrollment growth. For
example, the phase-out of existing pre-SHOP plans, the implementation of
employee choice by an increasing number of SHOPs, improved coordination with
agents and brokers, and increased marketing to small employers may help
stimulate enrollment growth. Conversely, other factors, such as the 2-year limit
on the availability of the small business tax credit and the likelihood, according to
stakeholders, that SHOP premiums will not be lower than non-SHOP premiums,
may hinder future enrollment growth. The evolving and localized nature of these
factors suggests that that a determination of the SHOPs’ long-term impact
remains premature at this time.
View GAO-15-58. For more information,
contact John Dicken at (202) 512-7114 or
dickenj@gao.gov.