Covered California SHOP is a Flop

It is with extreme sadness that I must report that Covered California’s small group health plans, or SHOP as it is known, is a total flop. I gave the folks at SHOP ample time to demonstrate they could perform to industry standards for underwriting, quoting and customer service and they have failed on all fronts. While there may be many happy small groups that have their employee health plans with SHOP, from my experience, I wouldn’t refer them to my most fierce competitor.

Is Covered California SHOP broken beyond repair?

The folks at SHOP and the management company, Pinnacle Claims Management, hired by Covered California to oversee the agents and small group plans seem to have little sense of how business really works. From a broken website that was finally taken down to incompetent customer service, I see little hope that SHOP will be able to fulfill their mission as an exchange for small group health plans. (See: SHOP barely open for business) I completely understand that the hubris and arrogance of the management at Covered California probably put unrealistic operational constraints on Pinnacle Claims Management, but that doesn’t excuse the overall failure of the staff from at least attempting to perform basic communication tasks like returning phone calls.

Problems before launch

SHOP was immediately put at a competitive disadvantage when Anthem Blue Cross decided not to offer their small group health plans through Covered California. Insurance Commissioner Dave Jones likes to take credit for forcing Anthem to pull out of SHOP. But in reality, SHOP needs Anthem more than Blue Cross needs SHOP. Many employees like Anthem Blue Cross and want to maintain their doctors. Not having Anthem Blue Cross plans reduces the competition and market for the SHOP concept.

Sales Director bails out

Another ominous cloud appeared on the SHOP horizon when the Michael Lujan, Director of Sales and Marketing for SHOP, left the organization right before the small group health plans were released in the summer of 2013. It’s unclear exactly why he left or if his departure served to worsen the overall performance of SHOP. Since SHOP offers little more than the promise of an employer tax credit for a couple of years, there is little reason for a non-profit or small business to sign on with SHOP given they don’t offer dental, vision, life or disability insurance.

Other flopping failures of SHOP

1. Website mess and removal

An ill-conceived enrollment portal so poorly constructed that it was finally removed from the Covered California website. One of the fatal flaws, known to Covered California and Pinnacle Claims Management before it went live, was employer’s state employment identification number. If this number was entered by the employer before the employee census was uploaded, completing the enrollment was impossible. (See: SHOP enrollment website details)

2. No client support

Without a properly working enrollment database, employers and agents can’t add, delete, or modify future employee changes. While SHOP is still taking paper applications, that doesn’t help with the ongoing client support that is necessary for any small businesses. Right now I can pick up the phone or log into a carriers website and make changes to and get information about my small group clients. This isn’t possible at SHOP.

3. Poorly trained staff

In theory, I could pick up the phone and call SHOP, if I don’t mind the one to two hour wait time. Even after an interminable amount of time on hold, the customer service representative still can’t answer any questions because the SHOP enrollment portal is dead. The Pinnacle Claims Management support staff is no better in offering any information. Numerous voice mails to several SHOP employees go unanswered. I have no clue what is going on with my client’s application and invoices. They won’t return phone calls and they obviously have never heard of email.

4. Bureaucratic responses

SHOP has numerous Regional Sales Executives that must be more interested in servicing their own clients over that of the lowly independent agent such as me. My client received and incomprehensible quote from one sales executive that left them wondering if I had abandon them since my name wasn’t even listed on the document. I suppose they are under orders to help Covered California’s mission of cutting out insurance agents in favor of bureaucratic and unresponsive sales staff.

Is SHOP even relevant?

With no website and no functioning customer service, Covered California’s SHOP for small groups has ceased to exist. There may be a glimmer of hope for a return, but it is painfully apparent that SHOP is wrestling above its weight class. Whether their total melt-down is a function of poor vision and management from Covered California executive management and Board is anyone’s guess. That is a moot point when small groups that earnestly wanted to support and participate in the ACA have been handed plate of food contaminated with mold and weevils.

SHOP update

On March 17, 2014, Covered California sent out an update to agents regarding SHOP. Below are some of the highlights of the email.

Dear Certified Insurance Agents,

Covered California appreciates the work that you are doing to improve access to health care in your communities and for all of California. We are aware that there continue to be delays in processing applications for the Small Business Health Options Program (SHOP), and that you have faced challenges in seeking application status, enrollment confirmation and billing for your small group clients.  

Since the SHOP enrollment portal has been taken offline, Covered California has adapted a paper-based operation while working aggressively to streamline the enrollment process. This has temporarily impacted processing times, and we apologize for the frustration you and your clients have experienced. We are confident that you will notice a marked improvement in SHOP agent support, processing times and quality over the next couple of months.  

Pinnacle Claims Management, Inc., SHOP’s contracted administrator, recently expanded its role to meet service demands while Covered California SHOP’s enrollment, eligibility and billing system is upgraded. While the enrollment portal is offline, Pinnacle is manually processing SHOP enrollment applications, change requests and eligibility transmissions to the SHOP medical and dental insurance carriers. Pinnacle is also implementing a new billing system for processing invoices and disbursing timely commissions, in addition to providing more staff to answer the influx of calls received at the SHOP service center. Beginning in the next few weeks you can expect to see more efficient enrollment and invoicing, quicker response to issues, and shorter wait times when contacting the SHOP service center.

Keep in mind that Covered California also works closely with our SHOP General Agent partners and the California Association of Health Underwriters (CAHU) to ensure that they receive updates and important information. We encourage you to take advantage of the wide range of services provided by these experienced professionals.

What is the Status of My SHOP Application?

Covered California has received a high volume of SHOP applications and is processing them in the order in which they are received. Once payment is received and applied against the invoice, eligibility is transmitted to the carrier. We are working to improve the data transmission process to our SHOP health insurance carriers, which will result in quicker access to care. 

As a reminder, SHOP paper applications are the only way to enroll in SHOP while the enrollment portal is offline. Paper applications can also be sent via U.S. mail or to SHOP’s dedicated fax number. Please see our SHOP Enrollment FAQ here for this contact information. Paper applications can also be sent to a Covered California authorized SHOP General Agent.

When Will My Client Receive Their Invoice?

Invoices for new SHOP applications are expected to be generated by the end of March for your client’s chosen coverage effective date. A new billing system is being implemented over the next few weeks which will allow us to send you and your clients their monthly invoice for SHOP coverage more efficiently. If you/your client have received an incorrect invoice, please note that changes to enrollment may not be reflected on your current statement.  Please remit payment as billed.  Adjustments will appear on subsequent invoices. 


Covered California SHOP broken.
  • nana422

    Not only are the IF and SHOP systems dysfunctional, but the IF system cranks out erroneous elivibility determnations.

    Previously, I could enroll people in Medi-Cal using theState’s website.

    Recently, the State’s website was changed to refer Medi-Cal applicants to the Covered CA website to apply.

    If an applicant truthfully answers “Yes” to the question “Do you have Medicare?”, the system will find that person ineligible for Medi-Cal, even when they are eligible.

    Special Needs Plans were developed for these “dual eligibles” so people who have Medicare definitely CAN have both.

    When I have brought similar situations to the attention of the Covered CA’s Board and even to Dave Jones the DOI Commissioner, my voice has fallen on deaf ears.

    Kevin, I think you are going PC on us when you say that this situation BORDERS ON malfeasance!

    • Kevin Knauss

      Wow, I was unaware of the issue with the dual eligibles. That is a situation where an organization doesn’t have the proper understanding and experience to adequately integrate the different government programs together. The Medi-Medi situation is beyond the scope of the CalHEERS system it sounds like.

      Contact me so I can learn more. We need to write about this and get the word out of the failure.

  • bewilderedbusinessman

    Just finished the renewal process for my small group, previously we had qualified for the small business tax credit. To continue we would have had to purchase insurance through Covered Cal SHOP. The proposals came in, the SHOP options were far and away more expensive to what we could find outside the program. Even figuring in our estimated tax credit which is dicey as the rules are not yet published, only in draft form in the Federal Register. Way back in 2010 when the tax credit first came into effect our premiums jumped to consume that credit in one fell swoop. We will cover everyone this year, we pay 100% of the employee’s premiums. The may not continue much longer, it might be best to get out of the health care business, most of my employees will qualify for a subsidy. I did laugh when the Federal expected “Average” premium in California was just under $5400. I WISH I could find them coverage for that amount.

    • Kevin Knauss

      Dear Bewildered Businessman,

      I applaud you first for the 100% contribution toward your employee’s health insurance premium and secondly for performing due diligence to compare health plans in and out of the exchange.

      Businesses that contribute at least 50%, let alone 100%, inadvertently trigger another dilemma in that the dependents of the employees are in most cases ineligible to receive tax credits to lower premiums through the exchange. For low and moderate wage workers, having to pay the full premium for dependents is a budget buster for the family.

      Consequently, I have advocated that many small businesses seriously consider dropping group health plans and let the employees shop the exchange and receive the tax credits.

      There are many good aspects to group health plans from better provider networks to the tax implications. But at some point the research and administration of group health benefits siphons important resources away from the management team that really needs to be focused on their core product or services.

      • bewilderedbusinessman

        The thought of dropping group health care coverage for my employees has crossed my mind. From a stress point of view, I am not looking forward to a renewal next year. One employee will probably not be eligible for a subsidy if I end coverage. The others will most likely receive a subsidy or be directed to Medi-Cal. The calculus to me of course is to keep them “whole” which might if I provide money to assist paying for that coverage, just reduce their subsidy, a possible poor choice too. The final cost of coverage per employee which is in a narrow range is just over $9K per year, of course being in region16 does not help.

        • Kevin Knauss

          We need a function, equation, or spreadsheet to help small businesses not only determine what is in their best interest, but what is best for the employee as well.

          The fact that you pay part of the employee health insurance premium is a small help to reducing your taxes and that the employee contribution is pre-tax, lowering their taxable income, also helps the employee.

          Another decision point aside from the financial is that small group provider networks are larger than the individual plans.

          It’s never an easy choice and certainly not as clear cut as some would expect.