The Small Business Health Options Program (SHOP) bill shares many of the basic strong points of the Enzi Nelson legislation but was deliberately drafted to address criticisms that stymied the SBHP and earlier AHP legislation, as well as provisions of these measures that limited the bills’ usefulness to the self-employed.
• More Protective Underwriting and Rating Rules for the Self-Employed: One concession made during negotiation of the SBHP legislation was to require the self-employed participating in an SBHP to be subject to each state’s individual market underwriting and rating rules. These provisions were a compromise that NAR was forced to agree with when the insurers would not agree to the application of the more traditional small group guaranteed issue/modified community rated rules to the self-employed. Unlike the SHBP bill, the SHOP bill’s underwriting, rating and access provisions put the self-employed on an equal footing with other small businesses by offering the self-employed the same protections available to the small employer – a key consideration for the self-employed Realtor community
• More Diversified Pools. Joining small businesses of all types in one large pool allows risk to be spread over a more varied population of participants. For Realtors who tend to be older than those engaged in many industries, such a more demographically diverse pool is an important improvement that will result spread the risk among a more demographically diverse population and allow for lower average premiums.
• Reduced Risk Segmentation: During the AHP and SBHP debates, concerns were raised about risk segmentation since both approaches would encourage the creation of a large number of association-based purchasing pools. This segmenting of risk raised concerns that groups or individuals that were not associated with a group and who are not as young or healthy would be left behind in diminished state markets and subject to higher premium costs. SHOP addresses this concern by joining small businesses in larger statewide or one nationwide pools where the risks are spread broadly.
• Tax Credits to Help Affordability: The Enzi-Nelson bill did not include tax credits to help small businesses afford the cost of health insurance. SHOP offers tax credits of up to $1,000 for individual coverage and $2,000 for family coverage for small businesses that pay at least 60% of the cost of coverage, with bonus credits for paying more than 60% of the cost. Self-employed persons can receive as much as $1,800 for individual coverage and $3,600 for family coverage.
• Avoiding the Divisive Benefit Battles of 2006: One of the most divisive provisions of the Enzi-Nelson bill was the bill’s benefit mandate provision. SHOP preserves benefits in all state-based health plans, whether they are offered through SHOP or in the existing state market, and uses the Institute of Medicine to develop recommendations based on evidence-based criteria for the benefits covered by the new nationwide plans available through the nationwide SHOP pool.
• More Choices, Greater Competition: In the Enzi-Nelson bill, most associations would probably be able to offer only a limited number of plans to their members, because of the limited pool each association would be offering to potential insurers. We believe that the national pool approach of the SHOP Act will encourage the development of broad, state-based purchasing pools, backstopped by a voluntary nationwide pool. Each of these pools will attract a larger number of insurers, all of whose insurance offerings would be available to every small business in the pool. An increased range of choices will spur increased competition.
• SHOP Reduces Overhead Costs: The large number of purchasing pools created by the Enzi-Nelson bill would each have their own overhead costs. SHOP, by encouraging the creation of a statewide pool in each state and a nationwide pool as a backstop, would create less administrative overhead.
