Under the ACA, health care costs are so expensive that small businesses are increasingly pushing their workers off of employer plans. That’s the gist of a recent NYT profile on the ACA’s Small-Business Health Options Program (SHOP), an insurance exchange set up for employees of companies with 50 employees or fewer. SHOP was supposed to help small businesses to continue covering their employees—or to start doing so for the first time—but instead the program is, in the NYT’s own words,”largely seen as a failure.” More:
“What I see on the exchange is junk,” said Bill Frerichs, the owner of Frerichs Freight Lines in Belleville, Ill., a trucking business. He opted to stay with the coverage he had from Coventry Health Care, owned by Aetna.
But even some of those who have taken advantage of the law to continue providing coverage say they worry about the future. Annie Grove, who along with her husband, Matt, owns Bagel Grove in Utica, N.Y., has about 20 employees, some of whom are covered under Medicaid. She offers a high-deductible plan to six of them, including herself, and uses the tax credit to help pay for about half of the cost. Ms. Grove says she is still unsure how long she will be able to pay for coverage, especially when the tax credits expire after two years and she can no longer use the money for premiums.
The lackluster performance of the small business exchange could increase the cost of the law for the taxpayer, as workers who lose employer coverage wind up on the individual exchanges, where many will be federally subsidized. But more importantly, SHOP is failing for the same reason the ACA is failing more generally: health care is too expensive. It was too expensive before the ACA and it continues to be too expensive now, and small businesses are feeling the squeeze. The story notes that some individuals will pay less on the exchanges than they would through employer plans, but the federal subsidies that underwrite that benefit can only go so far. Unless premiums stop rising, subsidies will have to increase year on year—an entirely unsustainable approach. We need to make premiums cheaper by lowering the cost of health care in general, and the ACA moved the ball toward that goal very little, if at all.