Health Care Reform in Illinois – Small Employers Should Be Losing Sleep

Posted on 01/11/2012


President Obama’s health care reform law (aka: the “The Affordable Care Act” or “ACA”) is designed to broadly change the field of health care insurance.  While the law’s main focus may be to help Americans without health insurance coverage, it also has the potential to bring a variety of positive effects to the world of small business.  For example, employers would surely benefit from the price stability, expanded choice, and administrative savings that a one-stop insurance shop could offer by way of ACA’s state exchanges.  ACA also offers states quite a bit of flexibility in how they choose to implement and operate their exchanges, and this is the time to be thinking of ways the law can best serve Illinois businesses.

ACA directs states to create exchanges to act as forums in which various “qualified” coverage plans can be made available to individuals and employees of small employers.  State exchanges have great potential to affect an insurance carrier’s ability to sell coverage there, and to affect aspects of that coverage such as plan design, and price.  Exchanges are also responsible for determining the eligibility of enrollees, determining tax credit eligibility for small employers, and for notifying employers when certain penalties have been triggered.

ACA is comprehensive, far reaching, and not very popular.  Many oppose the governmental mandate that all Americans carry health care insurance or be subject to penalty.  The U.S. Supreme Court has even agreed to hear the case of whether individuals can be forced to purchase insurance.  One more question before the court is whether ACA will survive at all in the event the “individual mandate” provision is ruled unconstitutional.

On the small business front, however, there is some hope that ACA will relieve the pressure employers are feeling these days.  A recent survey of small business owners in New York found that 84 percent felt the exchange concept was a good idea, and that 60 percent of those not currently offering coverage to employees would be inclined to do so if such an exchange existed.  Another survey showed California employers offering coverage dropped from 73 percent to 63 percent in the past two years alone.  That same study revealed 36 percent of employers anticipated raising their employees’ share of insurance premiums in the coming year, as the rise in premium costs continued to outpace the state’s inflation. 

While many states can’t decide whether to move forward on the creation of an exchange, Illinois is not one of them.  On July 14, 2011, Senate Bill 1555 (“SB 1555”) was signed into law as Public Act 97-0142 by Governor Quinn.  The legislation outlined the state’s desire that an Illinois Health Benefits Exchange be established and begin enrolling individuals and small employers by October 1, 2013. 

As with all things Illinoisan, however, Public Act 97-0142 brings with it a fair degree of political drama.  An earlier bill, Senate Bill 1729 (“SB 1729”), had been competing for passage to establish an exchange but then stalled.  Key political criticisms of each bill boiled down to governance and conflict of interest.  Proponents of SB 1729 felt their bill best protected the interests of consumers through tight controls over governance and conflict of interest, as well as price and type of products sold through the Exchange.  Opponents of SB 1729 accused that bill of not being “free market” in its approach, and did not like what they saw as excessive involvement by the Illinois Department of Insurance.  SB 1729 proponents countered that HB 1577 (a somewhat sparser precursor to SB 1555 and Public Act 97-0142) was written in the interest of insurers rather than the public good. 

The truth may lie somewhere in the middle.  The language of SB 1729 was in fact quite comprehensive, and its provisions and controls very extensive.  The language of Public Act 97-0142 on the other hand is very brief, leaving a lot to future legal wrangling and rule making.  Fortunately, Public Act 97-0142 also created a Legislative Study Committee to study issues relevant to the implementation and establishment of the Exchange.  The Committee was also directed to study and report on particular matters including, but not limited to: the governance and structure of the Exchange; stakeholder engagement; the size of employers to be offered coverage; risk pools for individuals and businesses; and standards of coverage. 

The Committee held various public hearings at which concerns relevant to employers were voiced.  David Borris, owner of Hel’s Kitchen Catering, testified before the Committee on the part of his own and other small businesses.  Seeking relief from the need to “shop endlessly for insurance each year,” he called on the Exchange to bargain with insurance companies so that small business could have access to the same type of insurance as big business.  Borris said that small employers should be able to hire based on skill, not health risk. 

The Campaign for Better Health Care (“CBHC”), an organization representing small businesses, unions, and the disabled community, warned against “politics as usual,” asking that the Exchange “be operated for the benefit of patients, small businesses and their employees, not insurance companies.”  To this end, the CBHC called for a “quasi-governmental” entity to run the Exchange (as opposed to being run entirely by government, or entirely by an independent corporation).  The CBHC also suggested that the Exchange be funded by assessments on Illinois insurers, not employers.  The CBHC further recommended the Exchange be an “active purchaser” in the new market in order to condense administrative costs. 

The Illinois Chamber of Commerce called for calm, noting that employers have a tremendous stake in the design and implementation of the Exchange.  “Slow and steady wins the race” it advised, while asking that the Exchange not become “a creature of politics.”  Finally, the United Food and Commercial Workers asked that the majority of any directors of the Exchange be representative of consumers’ interests and not those of the insurance industry.

The Committee’s report, released October 18, 2011, was surprisingly limited, careful not to make specific recommendations, and even asked for more time to continue its study.  First, the report summarized much of the data presented to the Committee throughout the study: 52 percent of the population is covered through either large or small employer plans; there are nearly 1.5 million people in Illinois without insurance, many of whom attribute their situation to not working for an employer that makes coverage available; the health insurance market in Illinois is very concentrated, with 49 percent of the entire market being held by just one producer, Health Care Service Corporation.

The report also appeared to lean toward the idea that the Exchange should not exert too much control or influence over the products sold there, suggesting its structure should take on more of a market “organizer” approach as opposed to that of a market “developer.”  A market developer model would actively engage and negotiate with sellers of insurance in order to obtain lower pricing and higher quality coverage, whereas an organizer model would merely ensure procedural compliance with respect to the activities between insurers and consumers.

The Committee further cited an inability to report on certain issues, such as risk pools for individuals and businesses, as well as standards of coverage for full and part-time employees, due to a lack of guidance on these matters from the federal government.  It also noted that the federal department of Health and Human Services is still taking comments on what sort of board representatives would ensure that consumer interests are well-represented.  On the matter of conflicting interests, the report advised that the public is concerned about its legislators serving as voting members on the Exchange’s governing board.  Thus, there remains much to be decided and many more developments to watch.

By October 1, 2013, the Exchange will begin providing eligibility determinations, enrollment services, billing, appeals, and customer service and outreach services to an estimated initial 500,000 consumers.  150,000 of those consumers will be employees of Illinois businesses with 50 or fewer workers.  By January 1, 2016, businesses with 100 or fewer workers will be given access to the Exchange’s products and services, at which point the number of Exchange consumers is projected to reach 1 million.

Before the Exchange opens in 2013, regulations will be adopted, a governing board will be appointed and policies set, protocols for consumer assistance will be designed, eligibility requirements will be determined, and mechanisms for feedback with and service to the small group market will be instituted.  But what sort of regulations will be necessary?  How will employers be represented on the board?  How will the Exchange best address the needs of small business?  ACA allows states to make many of its own decisions respecting the structure and operation of their exchanges.  But if a state chooses not to establish one, the federal government will step in and run it for them – without the state’s input.

SB 1555 was passed “to help individuals and small employers.”  The Governor signed Public Act 97-0142 with the intent “to protect Illinoisans from undue federal regulation.”  The state should be held to its word.  Employers do not need more regulation.  They need relief from soaring insurance costs, a fair chance at attracting a talented workforce, and a voice in how health care reform affects their businesses.  In the grand scheme of things, very little has been decided so far.  So the time to stand up and be heard is now.