Assuming it survives pending legal challenges, the Patient Protection and Affordable Care Act (PPACA), otherwise known as health care reform, will support the establishment of state health insurance exchanges to be operational starting January 1, 2014. For the first few years, these exchanges will be open only to individuals and small businesses (limited to businesses with 50 or fewer employees or, at the state's discretion, 100 or fewer employees) purchasing health insurance. Starting in 2017, the exchanges could be open to larger companies with more than 100 employees.

We will talk about how large employers could use the exchanges in another post. For now, let's focus on small businesses. The experiences of this group will greatly influence the experience larger employers will have in the future if they choose to use the exchanges in 2017 and beyond.

A series of articles in Health Affairs journal focus on how the exchanges might work and the keys to their success. (The Table of Contents for this issue is here.) In "Health Insurance Exchanges of Past and Present Offer Examples of Features That Could Attract Small-Business Customers," Terry Gardiner, vice president for policy and strategy for the Small Business Majority, notes that emerging exchanges can identify the key elements that are important to users by learning from states that already have exchanges up and running, most notably Massachusetts. For example, some basic offerings include a single point of entry for employers, readily available information that shows how one health plan differs from another, a single application, a call center or easy-to-use Web site, and a single premium payment for each employer. He also suggests that exchanges can provide added value by providing support for wellness programs, COBRA coverage, and flexible spending accounts.

In "How Small Business Health Exchanges Can Offer Value to Their Future Customers—And Why They Must," Jon Kingsdale, Ph.D., managing director and co-founder of Wakely Consulting Group, notes that efficiencies and cost savings will be the hallmarks of successful exchanges. Other states looking to create options with lower administrative overhead and greater cost efficiencies might also consider merging individual and small-business exchanges. With more members, exchanges have more clout in the marketplace and could use the resulting leverage to offer plan options that provide more value at a better cost than small businesses are used to seeing. For example, he notes that in Massachusetts the Network Health Plan with its low-overhead has accumulated 40% of total exchange enrollment.

In the end, small businesses' ability and willingness to offer health insurance coverage to their employees has always depended on cost. Quite simply, to succeed, the health insurance exchanges need to offer health plans that are affordable to small companies and their employees.

Next time, we'll focus on how large companies might use the exchanges in the future.