The Small Business Health Options Program (SHOP)
Eileen St. Pierre, The Everyday Financial Planner
(This post was updated on 2/11/14.)
In all the debate surrounding the implementation of the health insurance exchanges, there is one group that deserves more attention: small business owners. Businesses with less than 50 full-time employees are not required to offer health insurance coverage to their employees. On the other hand, large businesses with over 100 employees must cover 70% of their workers – referred to by the government as the “employer shared responsibility requirement” – starting in 2015 (delayed until 2016 for businesses with 50 to 99 employees) or they will pay a fee of up to $2,000 per worker. The government, however, wants to encourage small businesses to offer health insurance coverage through the Small Business Health Options Program, or SHOP.
SHOP offers the same types of plans and covered services as the Health Insurance Marketplace for individual and families. Once the employer chooses a SHOP plan, employees can sign up for it online through the Marketplace.
- In 2014, most state SHOPs will only let an employer choose one option. Some states will allow multiple plan offers – when you fill out your SHOP application you will learn if you can offer one or more plans.
- In 2015, employers will be able to offer multiple plans from all state SHOPs.
- Employers decide what percentage of the premium to pay for their employees. They will make a single payment to SHOP. They can then use payroll deductions to collect the employees’ share of the premiums.
- Optional dental plans will be available.
- Small business owners can work with agents and brokers to choose a plan for no additional charge.
The employer or the Marketplace will notify employees and tell them how to sign up. Employers will be able to create an employee roster and set up an email distribution list to distribute the offer of coverage (or download it and distribute it manually).
After receiving the offer, employees will:
- Verify their information to confirm that the name, date of birth, and Social Security information you provided are correct.
- Provide additional information like address, contact preferences, tobacco use, and whether they have dependents that need coverage.
- Review the plan to see if it meets their needs. Employees can see how much they will pay each month as a premium, what their deductible will be, and how much their total out-of-pocket costs could be. Employees will not be eligible for premium tax credits and cost sharing reductions.
- Decide whether to accept coverage for themselves and their family. They can view, download, and print a summary of the plan coverage. If employees decline coverage, they can buy coverage in the individual Marketplace or somewhere else.
Coverage will not take effect until the employer approves the plan. Once the employee enrollment period is over, the employer can see who accepted coverage. The employer can calculate the total costs to the business. At this point, the employer can decide to approve the plan or explore other SHOP options.
- Open enrollment in SHOP began on October 1, 2013. To have coverage begin on January 1, 2014, employers needed to enroll by December 15, 2013. [Update: In December 2013, it was announced that online enrollment in the SHOP program would be delayed for a year. To qualify for small business health care tax credits, use direct enrollment.]
- After January 1, employers can enroll thereafter on a monthly basis – there is no open enrollment period like that for individuals and families. Employers need to enroll by the 15th day of the previous month for coverage to start on the first day of the month.
- SHOP is open to employers with 50 or fewer full-time equivalent (FTE) employees, but beginning in 2016, SHOP will be open to employers with up to 100 FTEs.
- Sole proprietors and S Corporations cannot use SHOP – they can enroll for coverage through the individual Marketplace.
Employers who plan to use SHOP must offer coverage to all of their full-time employees – generally those working 30 or more hours per week on average. In many states, at least 70% of full-time employees must enroll in the SHOP plan.
- Employees with coverage through another employer plan, Medicare, Medicaid, the military, or veterans’ programs are not included in the minimum participation rate calculation.
- This calculation is made at the outset during enrollment. An employer dropping below the 70% requirement during the year will not lose SHOP coverage.
- Employers will be told on the SHOP application how this rule applies to their state.
The SHOP Call Center (1-800-706-7893) is now open from 9-5 (Eastern), Monday through Friday. Starting on October 1, the hours will increase to 9-7. I guess the government forgot that small business owners work weekends.
Visit my Health Care Reform page for more information.