Health Care Reform and employee choice within the Colorado Health Benefit Exchange



Everyone wants Choice, the More the Better.

One of the objectives of health care reform is to provide consumers with broader choice.

In the Individual health insurance market, consumers already have a variety of carriers and plans of benefits to choose from.

However, in the small employer market, employee choice in their carrier or plan of benefits is more limited.

The Colorado Health Benefit Exchange (COHBE) intends to change this.

An employer will be able to select coverage from one of four options within the Small Business Health Options Program (SHOP).

  • An employer can select a single carrier and a single plan of benefits. This is the most common option sold in the market today.
  • An employer can also offer a set of plans from a single carrier. Like the above option, many carriers offer this today.

However, the next two options are not available in the market today.

  • An employer can offer its employees any carrier within a single metal tier. There are four metal tiers or plans of benefits: platinum, gold, silver or bronze. Each plan offers the same defined set of benefits with different levels of cost sharing- the platinum plan being the one with the richest benefits.
  • An employer can also offer its employees any plan and any carrier in two adjacent tiers. For example, an employer could offer both the bronze and silver plans. Employees could then select any carrier that offers coverage in either of these two tiers.

In the market today, a small employer can only select one carrier to provide its health insurance.

There are several reasons for this.

First, it is difficult for the carrier to determine whether the employer’s plan meets the minimum participation level the carrier requires in order to insure the group.

Offering more than one carrier also increases the employer’s administrative burden.

Finally, it creates the potential for adverse-selection; a situation where one carrier gets a disproportionate share of individuals with expensive medical needs. If an employer fails to meet the minimum participation level, this can also create anti-selection.

The Affordable Care Act tries to address the selection issue through a risk-adjustment mechanism.

To reduce concerns over adverse-selection, carriers who have a healthy population will be required to transfer money to carriers who insure a sicker group of individuals, therefore adjusting the risk between carriers.

In addition, the Colorado Health Benefit Exchange will determine if the employer meets the minimum participation requirement in the SHOP. If it does not, the employer will not qualify to purchase insurance.

To address the administrative burden, COHBE will perform the enrollment and billing functions for the carriers. COHBE will also provide a single bill to the employer and pay each carrier separately based on the enrollment it receives. This will avoid the employer from having to work with more than one carrier.

At this point, it is uncertain whether the role of the Exchange and the risk adjustment mechanism will make it less expensive to purchase insurance through the Exchange. If it does not, employers may be reluctant to join the Exchange despite the fact they will be able to offer more choice to their employees.