Another ObamaCare delay for small businesses was announced this week.

“Employee choice” – which would allow small business workers to choose between different tiered health-care plans -- is being delayed in 18 states until at least 2016, according to CMS. While some states running their own Small Business Health Options Program (SHOP) exchanges are offering employee choice, this benefit had been delayed until 2015 for the 32 states relying on the federal government to run their SHOP exchanges.

Earlier this month, the Center for Medicaid and Medicare Services (CMS) gave state insurance commissioners the opportunity to request another year-long delay for employee choice, if they believed it would lead to significant price increases in the small-business insurance market. CMS announced Tuesday that 18 states were granted a delay until at least 2016. 

The states granted the delay were Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota and West Virginia. 

Meanwhile, 14 states using federally facilitated SHOP exchanges, including Arkansas Georgia, Florida and Indiana, will be instituting employee choice in 2015.

A Closer Look at Employee Choice

Aside from the tax credits available to employers purchasing plans on the SHOP exchanges, the employee choice benefit was widely seen as one of the top reasons why small employers might use the SHOP exchange.

“Employee choice is a critical element of the small business health insurance marketplaces. Small business owners want their employees to be able to choose among multiple insurance carriers when picking a health plan,” said Small Business Majority CEO John Arensmeyer in a statement released by the group.

Arensmeyer added that delaying employee choice in some states puts businesses in those states at a competitive disadvantage when it comes to attracting workers.

The 18 states delaying employee choice were asked to submit recommendation letters to the administration due June 2, 2014. Those letters, published on CMS’s website, express a variety of concerns about the ways that employee choice would increase prices in the small-business insurance market.

“[E]nrollees with ongoing medical conditions or anticipated elective procedures will choose more expensive benefit plans while enrollees who do not anticipate such expenses will often choose lower premium, lesser benefit plans,” wrote Louisiana Insurance Commissioner James J. Donelon, referring to an effect known as “adverse selection.” “As a result, issuers will anticipate higher medical costs, and thus will increase health insurance rates anywhere from 2%-7%, and postponement of such increased costs is desirable.”

While the anticipated price increases vary from state to state, an insurance industry spokesperson told FOXBusiness.com that some states could even see costs go up by 8% to 10% due to adverse selection.

In Oklahoma and a number of other states, insurance commissioners also suggested that the administrative complexity associated with employee choice would also lead to higher costs.

“Equally important is the level of consumer confusion the companies believe would be exacerbated with implementation of the model in 2015,” added Oklahoma Insurance Commissioner John Doak.

SHOP Exchanges Not a Priority?

Some experts say the employee choice delay reflects the administration’s inability to get the SHOP exchanges fully up and running on-time.

“My opinion is that it was delayed because [health-care reform] is complicated,” said Tom Harte, a New Hampshire insurance broker and the president of the National Association of Health Underwriters. “It’s evidence that trying to transform health insurance is more complicated than Congress ever expected.”

At the National Federation of Independent Business, analyst Kevin Kuhlman said the many SHOP-related delays broadcast an important message to the small-business community.

“What does this mean from the administration in terms of the implementation and rollout? What it says is that clearly the SHOP exchanges are kind of an afterthought and small businesses are low on the priority list,” said Kuhlman, the NFIB’s manager of legislative affairs. “The emphasis is on the individual exchanges, and getting those up and running.”

Though some insurers expressed concerns about employee choice raising costs, Kuhlman said the NFIB was hopeful that giving employees the option to select their own plans would increase competition between insurers, thereby decreasing costs.

“We never wanted this to totally disrupt or ruin any small group market, but the status quo isn’t working either. We need to insert some innovation or additional choices in there -- this is one of the limited ways the health-care law did that,” said Kuhlman. He added that without employee choice, he thinks the SHOP exchanges will likely remain unpopular with small employers.

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