Many small businesses find the services offered by Affordable Care Act's SHOP exchanges attractive, but they're also interested in self-funding, a potential threat to the critical mass needed for HIXs to thrive.
Researchers from the University of Chicago's National Opinion Research Center surveyed the leaders of 604 small businesses with up to 50 employees, both those currently offering insurance and those that don't.
More than anything else, costs are the top concern for both the 60 percent of firms surveyed who do offer insurance and those that don't, according to the NORC survey, published in Health Affairs.
Among those not offering coverage, 75 percent cited costs that are "too high" as their main reason, and more than 90 percent said premiums would probably have to be lower than they are today if they were going to start offering the benefit.
Asked about the prices they would need to afford to start offering coverage, many of those firms cited prices "considerably below" the current market average of $502 per employee per month: 22 percent said $300 or more, 15 percent said between $200 and $300, 56 percent said it would have to be less than $200, and the rest weren't sure.
Well below half of the small group insurance market actually has prices that could meet those expectations, with only 18 percent of small group health plans costing less than $300 per employee per month.
Aside from costs, most of the small employers surveyed by NORC like the administrative simplification and choice that the SHOP exchanges promise to bring, although businesses in the 36 states where the federal government is operating exchanges will have to wait at least a year for the employee choice functions -- a delay that may discourage enrollment.
The federally-run exchanges are using a simple "employer model" where a business's leader or benefit manager chooses one plan for all staff, while 17 of the 18 state-based exchanges are offering some version of the "employee model" originally envisioned in the ACA, where staff can choose from different health plans with a fixed employer contribution and contribute some of their own money for more generous plans.
Fifty-six percent of the small businesses polled by NORC said they're more interested in offering staff a choice of plans than in "offering workers one plan with less administrative work," while 36 percent did actually prefer the "employer model" being used in the federal exchanges.
On the topic of choice for both employer and employee, 66 percent of small business said they prefer having a broad choice of health plans, as opposed to being covered by one large insurer -- although many are interested in narrow network plans if that means lower costs.
If using a narrow instead of a broad network would lower premiums by 5 percent, 57 percent of the small businesses polled said they would opt for the narrow network, and if premiums were 10 percent lower, 77 percent would choose the narrow network.
Another option that small businesses were polled on is self-funding, an idea increasingly brought up by brokers.
More than a quarter of small employers that use insurance brokers said their brokers had discussed the possibility of self-insurance, while only one percent of those without brokers said they've considered the idea.
Among firms with brokers that discussed self-insuring and among firms not using brokers but considering self-insuring, 9 percent said they were "very likely" to self-insure and 14 percent were "somewhat likely."
Currently, only about 8 percent of firms with three to 50 workers self-insure, but NORC researchers estimate that the growth of self-funding may be underestimated, at the danger of impacting small group exchange markets, they argue.
"After a few years of converting to self-insurance, the small-group market could reach a tipping point that would leave the fully insured markets with greater risks, higher premiums, and eventually a so-called death spiral," the research team, led by Jon Gabel, wrote.
Based on a model developed by the Urban Institute, without regulation of stop-loss coverage for self-funding, the differences in premiums for fully and self-insured firms might reach 25 percent for single and 19 percent for family policies.
"To prevent this potential erosion of insurance," Gabel et. al. argue, "states need to reform their stop-loss markets so that stop-loss coverage is not de facto health insurance. Alternatively, if and when Congress is ready to make technical improvements in the Affordable Care Act, it should prohibit the sale of stop-loss coverage to small firms."