Brynn Popa

To SHOP or not to SHOP?

Brynn Popa |

While there has been no official word out of Washington, media reports say Ohio will be among the first five states where small business owners can shop for health insurance through the federal government’s online marketplace for small employers.

The controlled roll-out in late October of the Small Business Health Options Program (SHOP) Marketplace is meant to help minimize the deluge of problems that occurred when the government introduced its health insurance exchange for individuals. The hope is that opening the marketplace to a limited number of states will give the Department of Health and Human Services time to fix glitches before Nov. 15; that’s when small employers in the other states that chose not to create their own health insurance exchanges can access the SHOP Marketplace portal of HealthCare.gov.

For small employers in Ohio, the imminent opening of the federal health insurance exchange about a year after its planned introduction begs the question, “Is the SHOP Marketplace right for my business?”

It isn’t a question with a clear-cut answer. However, it doesn’t hurt to be armed with information about the program as you ponder whether to SHOP, or not to SHOP.

From COSE’s perspective, it’s important for small business owners to look before leaping – especially if you are already providing insurance under other group plans such as those offered by Medical Mutual through COSE.

One thing to take note of when evaluating this decision for your business is the tax credits. While some small businesses will be eligible for them when purchasing insurance via the SHOP, many will not qualify for this relief. It’s important that you clearly understand the parameters around the tax credits – and whether or not you fit into them.

It quickly is apparent upon a visit to HealthCare.gov that the tax credits are not available to everyone who buys coverage via SHOP.

Though the SHOP Marketplace is open to employers with 50 or fewer full-time-equivalent employees, only employers with fewer than 25 FTEs are among those eligible for the credits. But not even all these employers qualify for the credits.

For starters, the employees of a business with fewer than 25 FTEs must make an average of about $50,000 a year or less. Also, an employer must pay at least 50% of the premium costs of his or her full-time employees to qualify for the tax credit, which is worth a maximum of 50% of the employer’s contribution toward the premium costs under a sliding scale.

HealthCare.gov said the tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 a year or less. But even then, the credits only are available to eligible employers for two consecutive years.

Based on what we’ve seen, unless you qualify for a tax credit, employers can generally do as well or better with their current small group plans and their current carrier outside of the SHOP because SHOP rates seem to be adjusted to reflect perceived additional risk in those plans and additional fees are being charged to support the exchanges.

Another reason for small employers to think carefully before switching to SHOP is the potential for confusion among your employees.

A small business that chooses a group policy for all of its employees in the traditional market can help its employees more because it can reach out to the carrier and get questions resolved on the part of its people. However, under SHOP, a small company’s employees can select from any carrier that is part of the marketplace in their area. Consequently, the employees could all end up with different coverage, and employers certainly will face challenges in addressing employees’ questions and concerns.  Employees will be in charge of resolving the issues on their own behalf with the service team of the selected carrier.

But perhaps the biggest reason to proceed with caution is because some small employers with existing group plans can choose to stay in those plans through 2016 – and once they leave those plans, they won’t be able to go back to a non-Affordable Care Act option. Considering how changeable SHOP has been to this point, employers might want to think about maintaining status quo until the marketplace settles down

At some point, the SHOP might be the best route for employers who want to relieve themselves of the responsibility to help employees select benefits, while still providing some contribution to fund their benefits. However, more and more small employers are understanding that even with the headaches that sometimes come with insurance benefits, actively offering these benefits is a strong tool to attracting and retaining talent, which is becoming much harder and a more strategic business issue.