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A Brief Guide to Establish Successful SHOP Exchanges

In January 2014, not only the popular Health Insurance Exchanges (HIX) but also the Small Business Health Options Program (SHOP) exchanges are scheduled to come into operation as per the Affordable Care Act regulation. 

Both types of insurance exchanges will operate on the same basic principle except that while HIX will primarily cater to individuals market, SHOP exchanges will mainly service small businesses.
As per a study, average annual healthcare premiums have increased by over 113% over the last decade for employer-sponsored family coverage.  Small employers are unable to absorb such hikes in premiums as they are smaller in size and have less administrative spending capacity. Factors such as these has driven many small businesses to reluctantly drop their employee insurance coverage altogether. Not surprisingly, a large portion of uninsured Americans operates in the small business market.
Small businesses usually pay 18% higher premiums rates than large businesses for the same insurance policy. SHOP exchanges which will serve as online marketplaces are hoping to contain instances of employers dropping coverage by helping them avail the same benefits of high-value, low cost health plans, as are available to large employers. However, to establish successful portals states will need to bear in mind certain key points such as:
Ensuring wide range of affordable insurance options: The purpose of SHOP exchanges is to provide affordable healthcare options to individuals and small businesses. The health plans offered need to be such that they help in containing administrative costs, enhance efficiencies and allow employees of small businesses to avail benefits of wide variety of low premium health plans options 
Ensuring optimum structural design that aid in enrollment: The ACA has granted states the flexibility to design their own exchanges. Whatever Exchange design a state may opt for - combining its SHOP Exchange with Individual Exchange, permitting enrollment of  only businesses with 50 or lesser employees or hosting separate SHOP and Individual HIX until 2015 and then merging them both together – it should facilitate enrollment and reduce the insurance process burden for small businesses and individuals. 
Prevent adverse selection: If small businesses decide to self-insure themselves - pay the health expenses directly to their employees instead of enrolling them on an exchange to buy insurance - it may drive up the health insurance costs. Such instances may result in several health plans with disproportionate number of healthy and sick individuals with skewed premium rates.
To reduce and manage healthcare costs, it is necessary to maintain an even balance between healthy and ailing enrollees. The Exchanges will need to guard themselves against adverse selection – small businesses opting for stop-loss coverage when their employees are healthy and enrolling in exchanges when their employees fall ill, consumers purchasing insurance outside of SHOP exchanges etc. Unreasonably high number of sick employees in SHOP exchanges will drive up premiums and will defeat the whole purpose of setting up exchanges.
With the January 2013 SHOP exchange plan approval deadline just a few months ahead and January 2014 implementation deadline steadily inching closerBusiness Management Articles, the states will need to gear up in their SHOP exchange plans. 

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ABOUT THE AUTHOR


Author is a well known authority on health insurance Exchange in the US. He is currently looking to expand his expertise in Health Insurance Exchange and Shop Exchange available.



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