The Government Accountability Office (GAO) today released a report, requested by House Small Business Committee Chairman Sam Graves (R-MO), showing that enrollment for the state-operated Small Business Health Options Program (SHOP), created by the Affordable Care Act, was significantly lower than expected. No data was released for the federally-operated SHOP, but CMS told GAO it anticipates similarly low enrollment numbers. This report’s release comes just days after the Obama administration predicted that overall enrollment for next year is expected to be 30% lower than expected.

The Committee has documented continued mismanagement with the SHOPs going back to the summer of 2013, when another GAO report requested by Graves, confirmed the administration was ill-equipped for its rollout, and cited potential for “implementation challenges going forward.” This year, Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal and state SHOPs, but the data has not been provided. During a September 18 Small Business Subcommittee hearing, Centers for Medicare and Medicaid Services (CMS) Director of State Exchange Group, Mayra Alvarez, was asked about SHOP enrollment data, yet the administration was still unable to provide the information. Today’s GAO report is the first federal government release of SHOP performance data.

“Obamacare’s SHOPs have been fraught with errors and high costs from the very beginning,” said Chairman Graves. “The administration touted the SHOP as a way for small companies and their employees to benefit from more health insurance competition and choice, and ultimately lower prices. Instead, we have seen that costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees and the majority of small business owners paid more per employee for health insurance in 2013 than in 2012.”

Graves continued, “The lack of specific federal SHOP enrollment data confirms that CMS initially created no mechanism to monitor or measure its performance after enrollment began. It is apparent that the Obama administration didn’t prioritize the SHOP exchange in the law. Small businesses and taxpayers deserve better.”

GAO Report Highlights:

• As of June 1, 2014, enrollment for the SHOPs was significantly lower than expected, and, at its current pace, is unlikely to reach expectations by the end of 2014.

• State SHOPs – 76,000 individuals through 12,000 employers.
• Federal SHOP – data will not be available from CMS until next year, but CMS does not expect major differences between federal and state SHOP numbers.
• In April 2014, the Congressional Budget Office estimated that 2 million employees would enroll in coverage through the SHOPs in 2014, with the number of enrollees rising to 3 million in 2015 and leveling off at 4 million enrollees by 2017.

• Most state SHOPs had multiple plans available, but some states had counties with no plans. For example, in Washington state, SHOP plans were only available in a few counties, and the state had only 8 employers enrolled.

• The average number of employees per business enrolled in SHOPs is 3.7 employees.

• Many state SHOP features were delayed and enrollment was low as of June 2014 and key SHOP features, such as online enrollment and employee choice, were delayed for all federal SHOPs and some state SHOPS.

• The primary incentive for many small businesses to enroll in SHOPS was to utilize the small business health care tax credit.  But the credit is so narrow, complex and temporary that it has been an insufficient incentive to enroll. Although the President’s Council of Economic Advisors and stakeholder groups initially estimated over 4 million small businesses would be eligible for the credit, a 2012 GAO report showed only a small fraction (170,300) actually claimed it. 

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