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‘SHOP’ Small Business Exchange Pared Back Further
Most small employers can't buy plans online until November 2014; tax credits at issue

By Stephen Miller  12/3/2013
 

last updated 3/7/2014

Update: Further Delays of SHOP Options
for Small Businesses Likely

The administration is raising the possibility that small-business workers in some states might not be given a choice of health plans under the Small Business Health Options Program (SHOP)—potentially undermining a significant aspect of the law that federal health officials already have delayed once, the Washington Post reported on March 5, 2014.

Under the Affordable Care Act, states are required to offer a SHOP health care exchange where small businesses can enroll in and pay for insurance plans online. Companies in states that declined to build their own SHOP portals would be able to access a similar network run by the federal government. The administration has now again delayed the requirement that states using the federal exchange offer employees a choice of more than one plan option, pushing the deadline back another year to fall of 2015.

Even in states where the state-run SHOP marketplaces are up and running, few small businesses have signed up for new insurance plans.


On the day before Thanksgiving 2013, the Obama administration quietly announced plans to delay another part of the Affordable Care Act’s (ACA) Small Business Health Options Program, or SHOP, in states with a federally run health insurance marketplace.

SHOP is intended to help small business owners obtain health plans for themselves and their workers. However, according to a Nov. 27, 2013, online posting by the Department of Health and Human Services (HHS), employers who purchase small group coverage won’t be able to buy plans online through a federal SHOP exchange until November 2014 for plan year 2015. HHS also posted a set of questions and answers on how the federal SHOP would function, in a limited capacity, through 2014.

Starting next year, employer-provided health insurance must meet minimum ACA standards (see text box below), regardless of whether an employer falls under the ACA’s “shared responsibility” mandate, which, beginning in plan year 2015, requires businesses with 50 or more full-time equivalent workers to provide health care coverage. SHOP is intended to give small businesses access to a competitive, ACA-compliant health-coverage marketplace.

Under the ACA, each of the 50 states can set the size of its small group market at either one to 50 employees or one to 100 until 2016, and these small group employers can participate in SHOP. Beginning in 2016, all states must let employers with up to 100 workers purchase small group plans through SHOP. Starting in 2017, states may opt to let businesses with more than 100 employees buy large group coverage through SHOP.

Keith R. McMurdy, a partner at law firm Fox Rothschild LLP, notes in a blog post that "small employers who participate in the SHOP exchange can reimburse employees with pre-tax dollars," although "SHOP exchange reimbursement programs are still subject to the Section 125 cafeteria plan rules."

Small Business Tax Credit Still Available

Eligible small businesses in states with a federally run SHOP can still take advantage of the ACA’s small business tax credit—which in tax years beginning in 2014 could be worth up to 50 percent of employer-paid premium costs—by:

  • Enrolling their employees in coverage through an agent, a broker or an insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards.

  • Alternatively, employers may fill out the application form themselves or call a special SHOP-exchange call center.

"We are happy to see HHS and the administration actively encourage small business owners to utilize agents and brokers," commented Janet Trautwein, CEO of the National Association of Health Underwriters, to SHRM Online. "Not only are agents able to help small business owners find a plan that fits the health care needs of their employees and the financial needs of their business, but agents also offer consumer protections to their clients. Long after a policy is sold, agents continue to administer plans by working directly with carries to resolve any billing and coverage issues that might arise." 

The announcement further trims a program that was already substantially reduced. In March 2013, HHS announced a one-year delay to a key component of the SHOP marketplace on federally run exchanges. Before that announcement, eligible employers were expected to be able to use SHOP to select from among several competitive small group health plans that met the ACA’s mandated levels of coverage and state-specific requirements. But the November 2013 announcement said that in states with a federally run SHOP marketplace, the SHOP exchanges were required to offer only a single plan option, rather than multiple competitive options (see the SHRM Online article “ SHOP Exchange Delay Limits Small Employers’ Options ”).

While eligible employers can begin offering coverage through SHOP througout the year, for plans that begin on Jan. 1, 2014, the current signup deadline is Dec. 15. However, HHS then extended the enrollment deadline for the federal SHOP to Dec. 23.

“It is important to understand that this is not a delay of the federal SHOP exchange itself, but rather of one SHOP exchange functionality, albeit an important one,” explained Timothy Jost, a professor at the Washington and Lee University School of Law, in a post on the Health Affairs Blog . “The most important delays took place in March when employee choice and premium aggregation were put off. Employers should not experience any real adverse effects from this additional delay.”

State-Run Exchanges Have Options—and Challenges

Despite the latest HHS delays to the federally facilitated SHOP marketplace, state-operated exchanges may offer employers additional ways to provide coverage through SHOP—including allowing their employees to choose among competing plans as in California, or a traditional “employer choice” offer of a single plan. Any option must still be available in each of the ACA’s metallic levels of bronze, silver, gold and platinum, plus "catastrophic" level plans limited to those under age 30.

Jost noted that states that operate their own exchanges (including Utah, which operates just a SHOP exchange) will still be able to offer online enrollment, “but in some of them the SHOP exchange is not yet functional or does not offer coverage through the entire state.”  

In those states that have elected to set up their own exchanges but don't yet offer a state-run SHOP, small business that have received tax credits under the ACA could lose those credits in 2014, the Washington Post reported in December 2013:

In Maryland, small business owners are still waiting for health officials to open the state’s new employer exchange. Until then, Maryland employers are left with the same private insurance market they have been using for decades, and they cannot yet purchase plans that qualify for the credits. ... It is the same story in Idaho, Oregon and Mississippi. None of those states have launched a functioning small business exchange, and because each is building its own site, it is unclear whether employers will be able to access the full federal tax credit [in 2014]. ...

Meanwhile, even in states where small-business plans are currently available through the new federal marketplace, some employers are not pleased they must switch to plans sold through the exchange in order to qualify for tax credits they have been using since 2010.

Small Group Plans and Essential Health Benefits

 

The Affordable Care Act defines a small employer as having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.

 

Generally, if you have fewer than 100 employees (including full-time equivalents) you will be purchasing coverage in the small group market.

 

Starting Jan. 1, 2014, nongrandfathered, fully insured plans in the individual and small group markets and those in the exchanges are required to provide coverage of "essential health benefits" in 10 separate categories that reflect the scope of benefits covered by a typical employer plan in a particular state.

 

Self-insured small group plans, large group plans and grandfathered plans with 50 or more full-time equivalents are not required to offer essential health benefits, although they risk penalties if they don't provide plans that offer "minimum value" and are deemed "affordable."

Stephen Miller, CEBS, is an online editor/manager for SHRM. 

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