Changes to How Small Businesses are Covered Under BCRA

On July 13th, the GOP released a more recent draft of their Better Care Reconciliation Act of 2017. The original version was introduced by Senate Majority Leader Mitch McConnell (R-KY) on June 26, 2017.[i] Though the original bill was slated for voting on July 4th, the vote has since been delayed due to the heterogeneity of responses from Senate Republicans, with moderate Republicans concerned over the bill’s cuts to Medicaid (see this blog’s earlier analysis of Medicaid payment reforms in the AHCA), and far-right Republicans worried that the bill doesn’t go far enough in repealing Obamacare.

The BCRA mostly resembles the House of Representatives “repeal-and-reform” act, the American Health Care Act (AHCA), which passed the House vote on May 4th. A common theme seems to be a return to pre-ACA stratification of risks (despite claims that a version of the Cruz-Lee amendment would allow for plans that offer ACA-level coverage to be under the same risk pool as those offering skimpier plans, healthcare leaders still do not know how that will work).[ii] The BCRA’s approach to insuring small businesses and self-employed individuals is no different.

A key but often overlooked provision of the BCRA is the measure addressing the creation of “small business health plans” or SBHPs. Small businesses or self-employed individuals (if they reside in one of 14 states where individuals can purchase insurance as a small “group of one”), following certification by the Department of Labor, can purchase these SBHPs instead of purchasing a plan on the individual marketplace.[iii] The unique thing about SBHPs is that they are not governed by the same ACA rules that health insurance offered on the individual market. Instead, they function as health insurance coverage for larger groups, and can both price premiums differentially based on health risk and skimp on covering the 10 ACA-designated essential health benefits.

The overall idea is that SBHPs will be able to offer less comprehensive coverage at a fraction of the price that small businesses currently have to pay. This is relevant to the coverage that most health professionals receive since the vast majority of them still do not operate under a hospital employer and 57.8% of them operate in a practice of 10 or fewer physicians.[iv] Small groups may include single-specialty management groups such as anesthesia management companies, or self-employed and temporarily contractual clinicians.

The existence of SBHPs will segregate the market based on perceived health risk. This is a mode of adverse selection that may cause further instability to the individual insurance markets. For instance, small groups may choose to purchase a SBHP when its members are healthier but then revert to the individual marketplace when a covered individual encounters injury or illness. There is currently no regulation under BCRA that prevents shifts such as this.

[i] http://thehill.com/policy/healthcare/341828-new-gop-healthcare-bill-includes-version-of-cruz-amendment

[ii] http://www.fiercehealthcare.com/aca/3-changes-to-bcra-healthcare-leaders-should-know

[iii] http://www.kff.org/interactive/proposals-to-replace-the-affordable-care-act/

[iv] https://www.ama-assn.org/sites/default/files/media-browser/public/health-policy/PRP-2016-physician-benchmark-survey.pdf

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