House Small Business Subcommittee on Health and Technology Hearing
Federal Information & News Dispatch, Inc. |
Good morning.
Thank you Mr. Chairman, Ranking Member Hahn and members of the Subcommittee for the opportunity to appear before you today. My name is
Small businesses and the people who work for them comprise the backbone of the American economy. Health insurance is a tremendously valuable, often life-saving, financial product, which our federal tax code affords special status. Therefore, it is an important and essential goal to allow small business owners the opportunity to offer quality, affordable health insurance coverage to their employees. Prior to the implementation of the Affordable Care Act, half of the uninsured in this country were part of the small business community - owners, employees and dependents. n1 That is not for a lack of desire on the part of small business owners to offer health insurance coverage. The Small Business Health Options Program, or
I. The Small Business Health Care Tax Credit is Overly Complicated and Too Small
The Patient Protection and Affordable Care Act created the Small Business Health Care Tax Credit to be an accompanying incentive to participate in the Small Business Health Options Program. Prior to the launch of SHOP marketplaces on
While a fifty-percent tax credit may sound like a substantial incentive - particularly considering that employers may still use pre-tax funds to pay for employee health benefits - the reality is far more nuanced. First, there is the limited universe of eligible employers. The credit is only available to business organizations with 25 or fewer full-time equivalent employees and average annual wages below
The
On its Web site, I.R.S. tried to reduce the burden on taxpayers by offering "3 Simple Steps" as a screening tool to help taxpayers determine whether they might be eligible for the credit. However, to calculate the actual dollars that can be claimed, the three steps become 15 calculations, 11 of which are based on seven worksheets, some of which request multiple columns of information.
Setting aside the studies and statistics, it is very difficult to find a small business that has actually claimed the credit. They indeed exist, as we know from tax filings, but apparently in such small numbers that even a media outlet with the reach of
While the cost of premiums for plans available on many state SHOP marketplaces have been comparable to - and in many cases slightly lower than - similar plans prior to the opening of the SHOP, they generally remain higher than what many small businesses have determined they can afford to pay. This is where the tax credit is supposed to mitigate costs and increase the likelihood that a small business can actually afford to offer coverage. An expanded, simplified tax credit that is available for longer than two years would offer a real financial incentive for companies to either begin or continue offering health benefits.
II. The Inclusion and Empowerment of Brokers has been Minimal
For many small businesses that offer health insurance coverage to their employees, a health insurance agent or broker performs the bulk of the work necessary to facilitate benefit offerings. Small business owners frequently wear many (proverbial) hats, including that of human resources director, marketing director, and controller, among others. Thus, health agents and brokers play a critical role for small businesses. Many of these agents or brokers are comprehensive financial planners and advisers who work with small business clients on matters relating to life insurance and retirement benefits, investments and health insurance.
Health insurance, like any financial product, is complicated and its purchase often requires the advice and assistance of a licensed professional, such as an insurance agent or broker. Particularly for small group policies, where the health and financial well-being of multiple lives and families is at stake, there should be substantial involvement of agents and brokers to ensure that business owners make decisions that are in the best interest of both their company and their employees.
In its first year, at least in the states with fully or mostly functioning SHOP marketplaces, the marketing of the program to brokers, as well as the overall inclusion of brokers in the program, including empowerment, compensation and training, has been severely lacking. In short, even for those brokers who are aware of the SHOP marketplace in their state and the potential benefits available to clients, they must undergo state-mandated training and spend twice as much time on SHOP applications, all for the exact same level of compensation they would receive to sell a non-SHOP plan.
In the states that operate their own SHOP marketplace, brokers are required to be certified through a state-specific training process, which may either be in-person or delivered on the web. Brokers who went through the training programs have indicated that the materials were ineffective or even factually inaccurate. This included inaccurate exam questions and instructors who were required to teach material that was outdated. Further, many of the training programs covered SHOP only as part of a larger health care reform training, therefore requiring small business brokers to become educated upon issues unique to
Those issues only apply to the brokers who feel they were included in the SHOP process. The marketing campaigns for state SHOP exchanges have often failed to target or reach small business health brokers, instead focusing on the federally-funded navigators who primarily support individual exchanges. Additionally, and perhaps most importantly, the outreach to the business community about the existence of SHOP and the role that brokers can play in facilitating enrollment has been minimal. Many businesses remain unaware that they can turn to a local broker to discuss potential options under the Small Business Health Options Program.
The degree and structure of compensation for brokers has discouraged substantial involvement. A broker will earn the same commission or fee for selling a plan directly through an affiliated carrier as he or she would for selling a plan through the SHOP marketplace.
However, the time involved in enrolling a client in a SHOP plan is often double that required to enroll in a plan directly through a carrier. Some, including
The commissions are not the doing of CMS. In its
This is not to say that either CMS or the state-run SHOPs have excluded agents or brokers. Indeed, they all have provided resource pages on their websites promoting the value of health insurance brokers and making materials available for the brokers themselves. It can be safely assumed that some broker perceptions are attributable to the focus during 2013 and 2014 on the individual health insurance exchanges, while SHOPs were delayed or given a lower priority. Hopefully, as the SHOP marketplaces fully launch later this year, CMS and the state marketplaces will prioritize the inclusion of brokers and the trade organizations that support them.
III. The Website Delay and IT Issues Increased Uncertainty, Hindering SHOP
Third, and hopefully most obviously, the delay by the
On
The delays at the federal level were coupled with IT issues and a low prioritization in states that were running their own marketplaces. A thorough analysis of the impact of the Affordable Care Act in
For brokers, there were IT issues that left many uncompensated for their work. Brokers would assist business clients with enrollment in a SHOP plan and then the online system would not record the involvement of the broker and the insurance carrier would not know to pay the broker. These IT issues discouraged both brokers and carriers alike.
The most recent SHOP-related delay by the Administration will likely further hinder the program in 2015. On
While SHOP was supposed to be fully functional nationwide in 2014, what happened instead was a patchwork test run. In short, a key reason SHOP did not succeed in its first year was because its first year was postponed. A year with fully functioning structures and engaged players will be essential to truly judge efficacy.
IV. Other Factors Impacting the First Year of SHOP
Several other factors negatively affected SHOP during its initial year and will likely continue in the future. These include the many early renewals of small group plans in 2013, competition from private exchanges and the success of the individual marketplace.
Many insurers actively encouraged small business clients to renew (or "early-renew") their existing small group health insurance plans prior to
Private exchanges are likely to grow in popularity over the coming years. Because the ACA requires the pricing of plans to be the same within a SHOP exchange as it is outside, the free market can be expected to result in competition from private actors who feel they can provide a greater variety of plans or a better customer experience. Private exchanges have been increasingly popular among larger companies, but the private exchanges are actively seeking to sell to small groups.
Finally, despite the well-publicized disaster that was the launch of healthcare.gov, the
In conclusion, many small businesses want to offer health coverage. It simply needs to be more affordable, simpler and be facilitated by an experienced insurance broker. The Small Business Health Options Program has the potential to offer just that, but marketing, tax credits, information technology and broker involvement need to be dramatically increased in order for the program to achieve its laudable goals.
n1
n2 "Small Employer Health Tax Credit: Factors contributing to low use and complexity." Report of the U.S.
n3
n4 http://money.cnn.com/calculator/pf/cost-of-living/
n5 GAO report, supra, at page 10.
n6 Id.
n7 Blumberg and Rifkin at page 3.
n8 GAO report, supra, at page 13.
n9
n10
n11 Id.
n12 Memorandum from the
n13
n14
n15 "Beyond the Website."
n16
n18
Read this original document at: http://smbiz.house.gov/UploadedFiles/9-18-2014_Beck_Testimony.pdf
Copyright: | (c) 2010 Federal Information & News Dispatch, Inc. |
Wordcount: | 3490 |
House Small Business Subcommittee on Health and Technology Hearing
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News