Health Exchanges: The More, The Better for Small Business

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There aren’t many surprises in the Baucus health plan. However, Ezra Klein highlights what looks to me to be an important feature of the bill, and one that has not gotten all that much attention in the coverage that I’ve seen so far:

The House bill, for instance, specifically allows businesses with only 20 or fewer people to join.

Baucus goes quite a bit further. He begins by mandating that businesses with up to 50 employees be allowed to buy into the exchanges. If states want, they can expand that to businesses with 100 employees. There’s substantial risk adjustment to make sure that no insurer is gaming the system. At the beginning, for instance, all insurers have to pay into a “reinsurance” fund that compensates those insurers with objectively sicker populations, thus wiping out the incentive to risk select. States can also partner with one another to create regional exchanges, which will have larger risk pools and more bargaining power.

So far, so good. This, however, is where the Baucus plan takes that crucial next step: “In 2017, states must develop and submit to the Secretary a phase-in schedule (not to exceed five years), including applicable rating rules, for incorporating firms with 50 or more (or 100 or more for those states that already included firms with 51-100 employees) into the state exchanges.”

In other words, by 2022, the Health Insurance Exchanges will be open to all businesses of all sizes. That’s a huge deal. And the first place where I’ve seen the Baucus bill go substantially further than the other bills.

Why is this important? Because the more people you have covered in the exchanges, the greater clout they will have. And smaller businesses, which are far less likely to offer coverage to their workers, are going to find it difficult without that purchasing power. Here’s the situation now, according to this 2007 Commonwealth Fund report, which defines small businesses as those having under 50 workers:

Snapshot 2009-09-16 21-35-33

Between soaring health insurance rates and the effects of the recession, we can only assume the situation has gotten worse. It’s not that small businesses don’t want to see their workers get decent health care; it’s that they can’t afford to give it to them. The more help they get, the better the chances that health reform will actually work.