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Small business insurance exchange still long way off

Maryland officials still hope to enlist the help of the private sector to develop a health insurance exchange for small businesses, but progress is slow.

Officials will soon release a Request for Applications for companies interested in partnering with the state to come up with a way for small employers and their employees to shop for coverage.

Small businesses could see the first components of the new system as soon as this fall, but officials said the final product — whatever it looks like — probably won’t be ready until 2016.

The Affordable Care Act requires states to create a SHOP (Small Business Health Options Program), but many states, including Maryland, have had difficulty making that happen.

Rather than attempt to build a SHOP exchange from scratch, the Maryland Health Benefit Exchange board is asking “third-party administrators” (companies that work with insurance brokers and carriers) to create the portal themselves by building on their existing systems and relationships in the industry.

Several people with knowledge of the industry said the state’s decision makes sense, and that brokers and administrators are amenable to the idea.

“I think they’re wise to engage the brokerage community more closely by having [third-party administrators] administer SHOP, because the small-group market is served almost exclusively by brokers,” said Bryson Popham, a lobbyist and attorney who represents insurance brokers.

“So the state gets to leverage a pretty sophisticated distribution system that’s been tried and tested for many years.”

But there’s still no guarantee that companies will submit applications or that their proposals will satisfy the state.

There are about half a dozen benefit administrators in Maryland, but the market is dominated by three — Kelly & Associates Insurance Group Inc., Group Benefit Services Inc. (both based in Hunt Valley) and Dallas-based BenefitMall.

Representatives from those companies were not available to comment.

Dr. Joshua Sharfstein, chairman of the exchange board, said the state would prefer to contract with a handful of administrators, not just one. Based on feedback from the companies, Sharfstein said, he’s confident the state will receive satisfactory applications.

If not, small businesses can continue enrolling in insurance by working directly with brokers.

If benefit administrators do apply to work on SHOP, state officials envision a three-phase process for implementation. In the first phase, benefit administrators would adjust their internal systems to allow employers to offer insurance policies sold by more than one carrier.

Currently, employers can only offer plans sold by one carrier. But, the ACA requires “employee choice”— meaning workers must be able to choose between several carriers.

It shouldn’t be too difficult for benefit administrators to make that happen by this fall, according to Christopher Brandt, managing partner with Audacious Inquiry, a consulting firm hired by the exchange to evaluate options for implementing SHOP.

The companies already coordinate with insurance carriers for enrollment and billing. To enable “employee choice,” administrators would have to expand and enhance those systems to handle more complex transactions, Brandt said.

“From a technical perspective, we believe that what we’re asking a SHOP administrator to do is reasonable,” he said.

During the second phase of SHOP implementation, the benefit administrators would create online portals for businesses and their workers to access their enrollment information. Officials hope the portals would be in place by spring of 2015.

Sharfstein said he expects to pay the administrators $2 million to $3 million during fiscal 2015 for completing the first two phases of work. The companies would be paid only after demonstrating a functional system.

The last phase, which likely wouldn’t be completed until 2016, would involve making those portals much more robust so they resemble the original vision of a SHOP exchange.

Not until this phase would Maryland fully meet the ACA’s requirements for SHOP, Brandt said.