The Patient Protection and Affordable Care Act (aka Healthcare Reform) included provisions for small employers to buy health insurance through an Exchange or Marketplace referred to as the Small Business Health Options Program (SHOP). The implementation of SHOP in states with Federally Facilitated Marketplaces (FFM) was delayed for operation in 2014 to allow developers the time needed to ensure that the enrollment process would be as smooth as possible. Now that most of the kinks have been worked out on the Individual enrollment side, confidence is high that small employers will have SHOP as an option later this year.
How Does SHOP Work?
SHOP Exchange is expected to allow employers to choose a “metal tier” of benefit options (i.e. Bronze, Silver, Gold, or Platinum) from which their employees can select a benefit plan that meets their needs, wants, and pricing desires. Employees would have the ability to choose between participating insurers, and any of the benefit plans they offer on that specified metal tier. Unlike the historical “defined benefit plan” arrangements where the employer chooses the benefit plan(s), the employee will be in the plan selection driver’s seat in SHOP.
Since employers will be limited to specifying the metal tier of benefits for their employees, SHOP will transition small group plans into a “defined contribution” arrangement. Meaning: the employer will establish the dollar amount (or allowance) that they will contribute toward the cost of coverage for their employees by averaging the actual cost of plans selected. Employers would then deduct the balance from employees payroll to be remitted to the SHOP.
Pro’s and Con’s of SHOP
As with any new program introduced to the market, SHOP will have good and bad attributes. Recent releases from various industry publications would indicate that carrier participation in the SHOP program will be greater than what was anticipated for 2014. As of today, it would appear that Anthem BC/BS and Physicians Health Plan (PHP) are definitely going to participating, with a few others seriously contemplating their position in the Indiana SHOP exchange. The Pro in this case would be more carriers to choose from.
The number of plans offered, however, appear to be quite limited. This could very well be due to the fact that mandates in the ACA require insurers to price products on and off the Marketplace the same. When calculating in the guaranteed issue requirement, influx of adverse selection, and the likelihood that employees would choose a “richer” benefit plan if they have high healthcare utilization – insurers will align themselves in such a way to limit the exposure. Reducing the number of plans available is certainly one way of accomplishing that goal, but isn’t necessarily the best option for a small group plan. The Con in this case would be fewer plan designs to choose from.
Participation requirements will be monitored closely by carriers participating in the SHOP exchange. In most states, 70% of your full-time eligible employees will be required to enroll in SHOP – regardless whether they may be enrolled through spouses employer plans, Medicare, or other coverage. Some small groups plans may struggle to meet this requirement.
Who can enroll in SHOP?
Although a small group was redefined in ACA to include employers with fewer than 100 full-time equivalent employees (FTE), the initial implementation for SHOP will only be available to employers with fewer than 50 FTE’s. It is expected that beginning 2016, eligibility for SHOP will expand to employers with few than 100 FTE’s. With the numerous delays already experienced in Healthcare Reform – only time will tell.