SHOP Exchange Choices Under Health Reform Delayed Until 2015

Under the Patient Protection and Affordable Care Act (ACA), starting in 2014, small businesses in each state will have the option of purchasing coverage through a Small Business Health Option Program (SHOP) exchange. The SHOP exchange was supposed to include several health coverage options for employees of small businesses. However, in regulations issued on March 11, the Department of Health and Human Services (HHS) provided transition relief that would allow SHOP exchanges to only offer one health insurance option until 2015.

Previously, the HHS had set forth the minimum functions of a SHOP, including that the SHOP must allow employers the option to offer employees all qualified health plans (QHPs) at a level of coverage chosen by the employer, and that the SHOP may allow employers to offer one or more QHPs to qualified employees by other methods. The proposed rule includes a transitional policy for plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015. For these plans, a SHOP would not be required to permit qualified employers to offer their qualified employees a choice of QHPs at a single level of coverage but would have the option of doing so. For plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015, federally-facilitated SHOPs would not exercise this option, but would instead assist employers in choosing a single QHP to offer their qualified employees.

This transitional policy is intended to provide additional time to prepare for an employee choice model and to increase the stability of the small group market. Thirty-three states will have federally-facilitated SHOP Exchanges. The other states have the option of just offering one plan or implementing the full “employee choice” model envisioned in the ACA. However, by still offering one plan through the SHOP Exchange, small employers will still experience some of the benefits of the SHOP in 2014, including choice among competing QHPs and access for qualifying small employers to the small business health insurance tax credit, according to the regulations.

The administration cited “operational challenges” as a reason for the delay. As a result, it said, most small employers buying insurance through a SHOP exchange will offer a single health plan to their workers in 2014.

John C. Arensmeyer, the chief executive of Small Business Majority, an advocacy group, said that the delay of “employee choice” was “a major letdown for small business owners and their employees.” Arensmeyer continued, “The vast majority of small employers want their employees to be able to choose among multiple insurance carriers.”

“Pay or play” requirements. The regulations do not explicitly state what this transition relief means regarding the shared responsibility, or “pay or play” penalties in 2014. Starting in 2014, employers with 50 or more full-time employees are required to offer health insurance coverage to employees or face a tax penalty.

However, the SHOP transition relief does not appear to effect the implementation of the shared responsibility provisions of the ACA at all, since the SHOP exchange will still be offering one option. In addition, only employers with 50 or more employees are subject to the pay or play penalties, and SHOP exchanges are intended for small employers.

Final regulations issued in March 2012 note that states can set the size of the small group market at either one to 50 or one to 100 employees. In 2016, SHOP exchanges are supposed to open up enrollment to employers with 100 or less employees, and in 2017, states have the option of allowing employers with more than 100 employees to buy coverage through a SHOP Exchange. Therefore, depending on the state, employers subject to the pay or play requirements might not even be allowed to purchase coverage through a SHOP exchange in 2014.

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