November 16, 2015
Obamacare promised to help small businesses. But it’s now clear that small businesses don’t want the law’s brand of help.
Specifically, they want nothing to do with Obamacare’s “Small Business Health Options Program,” or SHOP. This online marketplace was supposed to allow employees at small firms to choose from among competing, low-cost plans — and grant employers tax credits to help them pay for coverage.
But in reality, SHOP has been a massive flop.
Earlier this year, the Congressional Budget Office projected that a million people would enroll. Instead, 85,000 workers from 11,000 companies have done so. Those 85,000 represent less than 1 percent of all workers covered by small-group plans outside Obamacare’s exchanges.
Many states’ SHOP exchanges are ghost towns. In Kentucky, only 92 employers signed up. Washington, Minnesota, Maryland, and Idaho all saw fewer than 200 workers enroll.
The promise that workers would be able to choose from a range of health plans has not been kept. In many states, there are fewer plans offered inside the SHOP exchange than on the private market outside. In several states, there’s only one.
Obamacare has also failed to reduce premiums for small businesses. Most haven’t ventured onto the SHOP exchanges because the plans available are more expensive than the ones they already have.
In California, for example, an estimated 7 out of 10 companies have kept their original coverage rather than switch to plans that have received Obamacare’s seal of approval.
“Most of the small group plans that had larger-than-average rate increases by switching to ACA plans [instead] grandmothered their plans” to avoid increases in costs, said Patrick Burns, president of the California Assn. of Health Insurance Underwriters, in an interview with The Los Angeles Times.
Their current plans are cheaper in part because they don’t have to comply with Obamacare’s costliest mandates. The law’s essential health benefits mandates, for instance, require insurers to cover services in at least 10 different categories, even if a person has no need for, say, maternity care.
SHOP-approved plans must also comport with the law’s rules on actuarial values, which dictate the percentage of overall costs that a policy must cover.
Finally, Obamacare limits what insurers can consider when setting rates to geographic location, the size of one’s family, age, and tobacco usage. And it puts all small groups in the same risk pool — so firms with healthier workforces pay much more for coverage than they if they were underwritten on their own.
Thanks to these mandates, insurers have little choice but to raise their prices.
Amazingly, things could’ve been even worse. Obamacare tried to expand the definition of “small group” to include firms with 51-100 employees starting in 2016.
These mid-sized firms would’ve then been subject to all those cost-inflating small-group mandates. Some 3 million workers would have seen their insurance costs climb 18 percent or more — or would have lost coverage entirely as businesses dropped it to avoid extra costs.
But they revolted — and prevailed upon Congress to pass a bill in October that allowed states to define “small business” under Obamacare.
The name of the law says it all: “The Protecting Affordable Coverage for Employees Act.”
Nor has the supposed carrot Obamacare offered to small businesses — a tax credit for signing up in a SHOP exchange — proved enticing. The Obama administration initially predicted that as many as 4 million small companies would claim the tax credit, which refunded 35 percent of the employer’s health costs. That figure has since increased to 50 percent.
But only a handful have been able to fulfill the complicated requirements associated with claiming it. According to the Government Accountability Office, simply determining whether a company was eligible required poring over more than a half-dozen worksheets and making 15 separate calculations.
Obamacare may be miserly with its credits, but it spares no one with its taxes. For instance, the law’s health insurance tax, or HIT, is projected to extract some $159 billion over its first 10 years.
Small businesses will fork over much of that money. According to one poll, 55 percent of small business owners expect premiums to climb further because of the health insurance tax. Almost 80 percent said that they’d likely have to lay off workers, delay hiring, cut back on insurance coverage, or take other steps to cope with the added costs.
These problems aren’t incidental to Obamacare. They’re the inevitable result of the law’s central premise — that lawmakers and government bureaucrats can make better decisions about small businesses’ health care than millions of businesses themselves can.
Until that central flaw is addressed, no amount of tinkering, delays, or exemptions will help small businesses who were promised a bright future but have been delivered a high-cost nightmare.
If that’s Obamacare’s idea of “help,” it’s easy to see why small businesses haven’t been interested.
This article originally appeared at Forbes.com.