GAO Report: Lower SHOP Enrollment Than Expected

November 19, 2014

pic-health-forms-insuranceOn Thursday Nov. 13, the Government Accountability Office (GAO) released a report entitled, “Small Business Health Insurance Exchanges: Low Initial Enrollment Likely due to Multiple, Evolving Factors.”

The report was requested by House Small Business Committee Chairman Sam Graves (R-Mo.) and evaluates the status of enrollment for the Small Business Health Options Program (SHOP), factors affecting how the plans have performed and possible ways to improve performance in the coming year. This report is the first released from the federal government on the SHOP performance data. Among the key findings, GAO reports that enrollment for the SHOPs was significantly lower than expected, and, at its current pace, is unlikely to reach expectations by the end of 2014.

According to the GAO report, earlier this year, the Congressional Budget Office (CBO) estimated that the number of employees enrolled in coverage through the state-based SHOPs (SB-SHOPs) and federally facilitated SHOPs (FF-SHOPs) would reach 2 million by the end of 2014, then increase to 3 million in 2015 and level off at 4 million enrollees by 2017. However, about 76,000 people—including employees, their spouses, and dependent children—enrolled in SB-SHOP plans purchased through nearly 12,000 small employers as of June. That equates to nearly 1.9 million below enrollment expectations for 2014. While enrollment data for FF-SHOPs is not yet available, those totals are expected to follow the same trend.

The report highlights that, by October 2013 all 33 of the FF-SHOPs run by the Centers for Medicare and Medicaid Services (CMS) and 14 of the 18 SB-SHOPs run by states were accepting enrollment applications, but the remaining four SB-SHOPs only became operational in May 2014. Furthermore, most SB-SHOPs had multiple plans available while some states had counties with no plans, and many key SHOP features, such as online enrollment and employee choice, were delayed for all FF-SHOPs and some SB-SHOPS.

Although the small business tax credit was recognized as a factor that might have served as a primary incentive for some employers to enroll in the SHOPs, several other factors were identified that may have contributed to the current low SHOP enrollment, including:

  • Delays in key SHOP features– The delays in implementation of online enrollment and employee choice in the FF-SHOPs. Until these key features are implemented, employers may not have as much incentive to enroll in coverage through the SHOP.
  • Limited awareness of and misconceptions about SHOP availability– The lack of employer awareness of the ability to enroll in SHOP plans beginning Oct. 1, 2013, largely due to misconceptions about whether the SHOPs were open for enrollment and a lack of outreach by states and CMS, who initially focused outreach and marketing efforts on the individual exchange.
  • Renewal of existing, noncompliant plans– The ability for employers to renew their existing, non-Patient Protection and Affordable Care Act (PPACA) compliant plans may have limited SHOP enrollment as most small employers chose to renew their existing plans in states where this was permitted, in part due to a general preference to keep their exiting plans, as well as other factors, such as concerns about potential premium increases associated with new plans.
  • Technical challenges and administrative burden– The ongoing technical challenges with the website and administrative burden (such as difficulty reaching customer service and, in some cases, the need to send application paperwork by mail) associated with many of the SHOPs have served as a barrier to entry for employers, in part by discouraging some agents and brokers from recommending the SHOP to employers.

In regards to technical and administrative issues specifically, the GAO stated that challenges included poor or inaccessible customer service for brokers; poor training for brokers on SHOP requirements; the extra time required to explain SHOP requirements to clients; challenges receiving compensation; and the lack of a dedicated broker “portal” on some SHOP websites that would allow brokers to set up and help manage accounts for their clients.

The report also identified various factors that may have the potential to stimulate future SHOP enrollment growth, such as 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. Conversely, other factors, such as the two-year limit on the availability of the small business tax credit and the likelihood that SHOP premiums will not be lower than non-SHOP premiums, may hamper future enrollment growth.

Please click here to read the full report and here for the report highlights.