Multi-Carrier Private Exchange Eclipses California SHOP

Covered California’s Small Employer Health Options Program (SHOP) is growing, but a private-sector competitor to the state-run HIX is growing even faster.

CaliforniaChoice, whose framework predated public exchanges by many years and led to their development, now has 12,070 employers in its program and 218,648 enrollees. That’s up from 11,500 employers and 150,000 members last August. In stark contrast, Covered California has 2,289 employers and 15,633 enrollees, up from 1,700 employers and 11,500 members during that same time frame.

Then again, any such comparison could be apples to oranges to a certain extent. For example, while the availability of tax credits gives SHOP exchanges a leg up over private exchanges, only a tiny percentage of small businesses are even eligible for such assistance.

“It wasn’t like getting subsidies where it was up to 400% of the federal poverty level,” says Ron Goldstein, president and CEO of Choice Administrators, which runs the private-sector small employer pool known as CalChoice for short. “It was a narrow slice of the market – a single-digit percentage in California.”

In addition, Goldstein explains that dominant carriers aren’t clamoring to participate in SHOP exchanges because the populations are just too small and not worth the effort. One such example is Blue Cross and Blue Shield of Minnesota, which has 82% of the market. “Why would they want to play in a SHOP environment where they have to dice and slice now?” he asks.

The state-run Covered California’s average group size for SHOP enrollment is three to four lives, while he says CalChoice is closer to 12.

When the Health Insurance Plan of California launched in 1993, Goldstein spent three years trying to build a better mousetrap. His benefits-administration company has mirrored the private exchange model for nearly 20 years, but does all its business strictly through brokers.

“I think that was the real impetus that gave us life in the market – that the brokers saw us as an ally, not as someone trying to take their business as when the state first came out with the HIPC, they took direct business,” he explains. “They didn’t use brokers at all.”

Goldstein credits the role of brokers and a laser-like focus on customer service for sustaining his company’s business model. But where the rubber actually meets the road is that CalChoice delivers a rare multiple-carrier solution, whereas traditional insurance options, as well as private and SHOP exchanges, offer a single-carrier platform.

CalChoice carriers include Health Net, Kaiser, Anthem, United and Aetna, as well as two regional players, Sharp and Western Health, with an eighth carrier planned for a fourth-quarter launch. This is a key strategic differentiator at a time when rates do not vary much from one network or delivery system to another. In addition, CalChoice is able to offer ancillary plans such as dental, vision and chiropractic coverages.

Goldstein wonders how SHOP exchanges will be rebranded to attract more business based on an earlier pronouncement to expect better marketing and promotion. “Unless they increase what those tax credits are and increase the minimums for the tax credit, I don’t see it really affecting how we do business, or the direct market,” he says.

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