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Obamacare’s Opponents Spread Doubt and Confusion About Small Business Exchanges

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In the past, I have reported on misinformation about healthcare reform going viral. It has happened again, and this time, reform’s critics have outdone themselves.

In March, the Obama administration proposed revising the rules governing insurance marketplaces or “exchanges” where small business owners will be able to pool their buying power, and purchase affordable, high quality insurance for their employees. The change to the rules is small, and it is temporary.

Nevertheless, Obamacare’s critics pounced, and soon began distorting what the administration said. USA Today quoted the Chamber of Commerce (long a foe of reform), claiming that the small business exchanges “will be of little or no value to employers, or by extension, their employees.”

                                     How Small Business Exchanges Lower Premiums

Before considering the charges, let’s review what the health reform law’s Small Business Health Options (SHOP) exchanges offer. Today, insurers charge small companies 18 percent more because the administrative costs of hand-selling policies to small groups are high.

But in the SHOP Exchanges, small businesses automatically become part of large groups. Some will qualify for tax credits.  The Congressional Budget Office (CBO) estimates premiums will fall by 2 percent to 11 percent. Meanwhile those premiums will buy far better coverage. (Policies sold in the SHOP Exchanges will have to meet the high standards set for plans in the individual exchanges).

                             The Proposed Change: What the Administration Actually Said

Now consider the proposed change. Originally, the Affordable Care Act called for opening SHOP exchanges to employees in 2014. First, the employer would choose a tier of insurance. (Bronze, Silver, Gold or Platinum tiers will pay 60 percent to 90 percent of an average group’s covered benefits, with any individual’s out-of-pocket spending capped at roughly $6,000.) Employees would then pick plans from that tier.

But Washington had assumed that states would be eager to help their small businesses by setting up exchanges. Today, only 16 states and the District of Columbia have begun. Now the administration realizes it will need more time to set up the IT that millions of employees will need to navigate exchanges in 34 states.

 HHS still plans to open the exchanges in 2014, but only to employers. They will survey the many plans available, and then pick one for their employees. “Employee Choice” will be delayed – but just for one year. And the postponement will apply only to the 34 states that have not set up exchanges. In 2014, the other 16 states and D.C. can (and probably most will) open exchanges to employees.

“Nearly 40% of small businesses in this country do business in the 17 states implementing their own exchanges,” observes John Arensmeyer, president of Small Business Majority (SBM), a non-profit advocacy group. And “starting next year, small employers will still be able to pool their buying power in the exchanges, giving them the kind of clout large businesses currently enjoy.”

“This is not a failure, it’s a bump in the road,” Small Business Majority’s Rhett Buttle told me.

                                               The Attack Begins

Nevertheless, Robert Laszewski, a long-time health reform critic, jumped on the bump, telling Modern HealthCare: “Offering a single employer all of the exchange options is a complex undertaking . . . a delay means that the exchange isn’t going to offer any advantage over the employer simply staying with their existing insurer.”

Laszewski suggests that “a single employer“ will not be able to choose from all of the exchange options.” This is simply not true. Business owners will choose from all plans in the exchange. As for an employer keeping his “existing” coverage – why would he do that? The policies in the exchanges will offer better coverage for less.

Above, the opening of a post that I wrote for HealthInsurance.org.   To find out more about why Lawzewski’s is bashing small business Exchanges–and what what Time’s Joe Klein, the Wall Street Journal and Wonkblog’s Sarah Kliff had to say– read the entire post on HIO.   You’ll also find out  why some of us think that the importance of “consumer choice” may be “way overblown.”

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IRS ruling a ‘disaster for Obamacare?’ Not quite. Ruling may be ‘unfortunate,’ but it won’t leave ‘millions’ uninsured

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Under the Affordable Care Act, Americans who are not offered “affordable” insurance at work can purchase coverage in the ACA’s health insurance exchanges, where many will be eligible for generous subsidies.

The law defines “affordable” as insurance that costs less than 9.6 percent of income. But the ACA doesn’t specify whether it is referring to individual coverage or family coverage, which is always far more expensive. The wording is ambiguous, an “oversight,” say many legislators.

Now the Internal Revenue Service (IRS) has ruled that the government will look at the cost of coverage for an individual – not a family – when deciding if a plan is “affordable.”

A disaster for Obamacare?

Earlier this week, Forbes ran a story about the rule under a headline that blared, “IRS Ruling to Create Millions of Uninsured Americans as It Undermines the Very Intent of Obamacare.”

Forbes’ take plays right into the conservative claim that Obamacare is a disaster. “We are now entering the crucial phase of the law’s enactment,” crows blogger Dwight L. Schwab, “and many critics are saying, ‘I told you so.’”

Whoa! Let’s look at Forbes’ argument, and the numbers.

Fear-mongering vs. facts

Forbes observes that, according to the Kaiser Family Foundation’s 2012 survey of employee benefits, on average, workers contribute $951 annually for an individual plan. But those buying family coverage fork over $4,316, “a number well in excess of the 9.5% of earnings for someone making just $35,000 a year.” Yet, under the IRS decision, “only the portion of the contribution attributable to the individual employee” can be “considered for the purpose of determining what is affordable – not the entire contribution.”

Forbes’ contributor Rick Ungar offers an example: If an employee who earns $35,000 and “is the sole breadwinner in the family” pays less than $3,325 annually for his own insurance … “nobody in the family qualifies for participation on the healthcare exchanges and nobody can qualify for the intended government subsidies.” If the employee signs up for a family plan with his employer it would cost “over 12 percent of their annual income … a crushing amount.”

“The result,” Ungar says, “will be millions of spouses and children left to go uninsured.”

Millions uninsured???

Let’s begin with that last sentence. Just how many children would be shut out? Bruce Lesley, president of First Focus, a children’s advocacy group, estimates that 500,000 children could remain uninsured.

A U.S. Government Accountability Office (GAO) report offers a similar estimate … that “460,000 children may be left uninsured if states stop funding the Children’s Health Insurance Program (CHIP) beyond 2015.” (Funding ends in 2015 because legislators assumed the ACA would protect kids.) “Federal funding could be extended,” the GAO notes. (My guess is that, if necessary, Congress would expand CHIP funding.)

But what about the mothers? If 500,000 children might be affected, that means that, at most, 500,000 mothers would be left uninsured. But in most of these cases, parents may well have have two children, sometimes more. Let’s assume that, on average, they have two children. That means 250,000 mothers (half of 500,000) might find themselves uninsured because of the IRS rule.  Add those 250,000 mothers to a maximum of 500,000 children, and 750,000 people wind up “going naked” as insurers put it.

Married couples who don’t have children also should be counted. If only one spouse works, and they cannot afford the family plan his employer offers, another adult could be left out. But, these days, few married women under 65 who don’t have children stay at home. We’re still far from “millions.”

Forbes’ example

Forbes’ example of a single-breadwinner family is the exception, not the rule. Among families earning $25,000 to $60,000, 67 percent of mothers and 85 percent of fathers work.In these cases, couldn’t each parent purchase insurance through their employer?

Note: The post originally appeared on Healthinsurance.org  To find the answer to that question, and why the Forbes Op-ed represents “fear-mongering, pure and simple”, please click here.  If you like, come back here to comment.

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