Utah’s Exchange Shifts Cost to Families

Editor’s Note: Just over a year ago, CCF and our colleagues at Georgetown’s Center for Health Insurance Reforms released a paper examining the health insurance exchanges operating in Utah and Massachusetts.  We concluded that they should not be viewed as ideological “bookends” but rather as entities with different goals that had taken different steps to attract consumers as well as health plans to participate.  As states ratchet up their efforts to put exchanges in place, we thought it would be a good time to check on how the Utah Exchange has evolved in the past year.  Lincoln Nehring from Voices for Utah Children provides an update.

By Lincoln Nehring, Voices for Utah Children

Utah’s Exchange, launched in 2009, serves many functions that the Patient Protection and Affordable Care Act assigns to Small Business Health Option Program (SHOP) exchanges: an online marketplace serving small businesses with fifty or fewer employees.  Like the ACA’s SHOP exchanges, Utah’s Exchange has the goal of connecting employers who have not previously offered health insurance with coverage the employer can afford.  However, what makes Utah’s Exchange unique, and also troublesome for employees and their families, is its policy allowing for a “defined contribution” from employers.  This model allows an employer to set a contribution amount for their employees’ health premium without regard to how much the coverage may actually cost.  In Utah’s traditional small group market, employers must contribute at least 75% of the cost of the employee’s premium; but on Utah’s Exchange an employer can arbitrarily decide to contribute whatever they like, whether that is $2,000, $500, or $0 dollars per month.

This opportunity for shifting costs from employer to employee was intentional.  The designers of Utah’s Exchange wanted to encourage enrollees to choose high deductable insurance plans by making these plans more financially attractive to the employee.  Enrollment data suggest the Exchange has been successful in that effort.  Thirty-five percent of enrollees on Utah’s exchange are in high deductible plans compared to only 12% of enrollees in Utah’s traditional small group market.

Employer contributions are lower than they are in the traditional small group market as well.  Thirty-four percent of employees in Utah’s Exchange are receiving a contribution of between 0% and 50% from their employer.  Nearly half, 47%, of employees are receiving less than the 75% premium contribution required of employers in the traditional market.

Why might giving employers greater flexibility to determine how much they will contribute to their employees’ plan be a problem?   The ACA’s affordability protections are significantly weaker in the SHOP exchange than they are for families getting their coverage in the American Health Benefits Exchanges (individual market exchanges).   Without greater employer incentive, there is great risk that coverage will be unaffordable to families or that families would choose  low-quality coverage based solely on price, rather than plans that meet their needs.

Enrollment in Utah’s exchange remains low, 285 employers, covering 2,500 employees and 4,300 dependents.   For a variety of reasons, it appears that most small businesses still prefer the traditional market.  However, for employers looking to shift a greater burden of health care costs to their employees, the Exchange’s Defined Contribution Market provides an attractive option.  Unfortunately, it is an option that can make health coverage much more expensive for Utah’s families.

As other states develop SHOP exchanges, they should pay careful attention to employer contribution amounts to make sure coverage through the SHOP provides a good deal for employees as well as employers.