HARTFORD, CT — Connecticut’s health insurance exchange has largely been a success, but a separate small business exchange has struggled to drum up business.

Access Health CT, which operates the Small Business Health Options Program, or SHOP, hired Frederick McKinney’s firm BJM Solutions to find out why the share of small businesses using the exchange was so “negligible.” Fewer than 400 small businesses are participating.

McKinney presented the findings to the Access Health CT Board of Directors Thursday.

“Access Health’s best path toward significantly growing participation in the small business exchange requires that Access Health must focus on its core mission of reducing the number and percentage of uninsured residents in the state,” McKinney said.

He said that may seem obvious but “we show that pursuing growth in SHOP without a central focus on Access Health’s core mission has led to conflicts with carriers, brokers, and business organizations and this conflict has stifled the small business exchange and Access Health’s growth in this place.” 

He said some stakeholders view Access Health as a competitor and as a “nuisance” in some cases.

Since Access Health is funded by a flat fee from all insurers, there’s no benefit to them to lure businesses away from business associations that already offer that benefit to their members. He said Access Health only benefits by reducing the rate of the uninsured.

“This uninsured business population represents the final segment of uninsured CT residents in need of affordable high quality health insurance,” McKinney wrote in his report.

Courtesy of CT-N
Frederick McKinney of BJM Solutions (Courtesy of CT-N)

There are 30,000 small firms with fewer than 20 employees in Connecticut and about 12,000 of those firms that “are right in the sweet spot for Access Health,” McKinney told the board.

Those firms share characteristics with the firms already participating in SHOP where the business owners feel connected to their employees and they want to do the right thing by offering health insurance.

There are also the 163,000 firms that currently don’t have employees and might be “Mom & Pop” operations who will need to grow their business by hiring someone in the future.

“And not all of them are uninsured by the way,” McKinney said.

But those companies might be on the verge of creating a new position that would qualify them for coverage under SHOP.

The firm might not offer insurance currently, but it doesn’t mean they don’t obtain their insurance in the individual marketplace with about 110,000 other consumers. They could also have another job that offers them health insurance.

Along with the small business exchange, the Affordable Care Act offers employers tax credits for giving their employees insurance through SHOP.
Small employers are eligible for a tax credit of 50 percent of the cost of their employee premiums if the average wage of their employees is less than $50,000, they have fewer than 25 employees, and they have not previously received two consecutive years of tax credits.

“What we found is those credits are not driving the market,” McKinney said. “Only about 20% of the SHOP companies are actually utilizing the credit.”

He said wages in Connecticut are typically much higher than $50,000 making it virtually impossible for small businesses to access the credit. However, changes to the tax credit would need to be made at the federal level.

McKinney suggested that the Access Health CT Board of Directors spend some of their marketing budget on targeting these small business owners. Most of the marketing efforts have been aimed at individuals since the program launched in 2013.

SHOP currently offers plans from two carriers, Anthem and ConnectiCare.

John Carbone, who took over management of SHOP a few months ago, said their retention rate of small businesses currently in the plan is around 84%.

Earlier this year lawmakers sought to help small businesses by introducing legislation that would have allowed them to join the state-run Connecticut Partnership Plan.

Plans for that were scuttled when negotiations with the insurance industry fell apart.

It’s unclear if lawmakers will seek to revive a similar version next year.