Presentation by John Arensmeyer

Small Business Majority

California Exchange Board Meeting

February 21, 2012

Exchanges: Attracting Small

Businesses

• Public policy advocacy organization – founded and run by small business owners

• National – based in Bay Area – with offices in Sacramento, Los Angeles, Washington, DC and New York

• Research and advocacy on issues of top importance to small businesses (<100 employees) and the self-employed

• Very focused on healthcare over the past 6 years

About Small Business Majority

Some key elements are the same for both the individual and SHOP exchanges:

• Quality

• Value

• Delivery reform

• Easy-to-use systems

But, other issues differ

Exchanges: individual and SHOP

Key SHOP issue: plan design

• Most important – COST is king

• SHOP must sell plans that small business owners actually want, not the ones it thinks they ought to like – otherwise small businesses won’t participate

• Small businesses are diverse, so are their healthcare needs – they and their employees don’t all want the same plans with the same cost structures.

• The Exchange will not be able to offer plans at lower rate than in outside market, but its role as an active purchaser can still be very powerful

• The SHOP exchange should strive to become so attractive that plans want to be part of the exchange—enabling it to negotiate good value that will have to also be offered outside the exchange

This will benefit the whole system

Key SHOP issue: active purchasing

• Look at it as competitive market where SHOP exchange will have to compete.

• SHOP exchange starts off with advantage in that small businesses will only be able to get the small business tax credit in the exchange

Key SHOP issue: differentiating the SHOP

But SHOP must go far beyond that

• The SHOP must be different from what’s available on the outside market--otherwise small employers will have no reason to stop offering the insurance they offer today and switch to the SHOP

• Employee choice: Today, the only workers allowed to select their own plan generally are those who work for large companies or the government. SHOP can help level the playing field

o By more than 2:1 CA small business owners said employee choice makes the exchange more attractive*

*Pacific Community Ventures poll released March 2011

Differentiating the SHOP

• A wide range of options:

o Broad networks

o Narrow networks

o Integrated care systems

o CO-OPs

• The ACA sets a floor for what must be covered, so the Exchange can ensure maximum flexibility for different needs.

What does choice mean ?

• Services: 80% of all small businesses have fewer than 10 employees; most do not have sophisticated HR departments. A SHOP that provides HR-type services can take huge administrative burdens off employers. (e.g. COBRA, HRA administration, etc.)

Differentiating the SHOP

• Workplace wellness: Other successful exchanges provide prevention and wellness programs, similar to what large companies are able to provide today—helps lower overall healthcare costs in the long-term.

Differentiating the SHOP