Starting in 2014, certain small employers will have the option to make health-care coverage available to their employees through the Small Business Health Options Program (SHOP). This is a type of health insurance exchange created to help small employers to enroll their employees in the small group market. It may be run in conjunction with or separate from the health-care exchange for the individual market, and it may be operated by the state or in connection with the federal government.
The SHOP Exchange, also known as a SHOP Marketplace, allows the employer to select the qualified health plans from which employees may choose coverage. The employer typically will choose a level of coverage and the amount it will contribute towards its employees' coverage. Employees then choose from among the plans and levels offered. The SHOP bills the employer monthly, and the employer pays its premium contribution for its employees to the SHOP. The SHOP uses the collected amounts to pay the insurance companies that provide the coverage.
An employer generally is eligible to participate in a SHOP Exchange if it has a primary business address within the state in which it is buying coverage. Sole proprietors, certain owners of S corporations, and their spouses are not eligible to purchase coverage through a SHOP Exchange unless they have common-law employees. In general, SHOP Exchanges are designed for employers with 50 or fewer full-time employees. Beginning in 2016, all SHOP Exchanges will be open to employers with up to 100 full-time employees. Federally-facilitated SHOPs determine the number of employees by taking part-time employees into account to determine the number of full-time equivalent employees. For plan years beginning after 2015, state-based SHOPs will count employees using this full-time equivalent method.
The employer must allow all full-time employees, defined as employees working 30 or more hours per week, and qualifying dependents to participate. The employer also may offer coverage through the SHOP to other individuals, such as part-time employees and retired employees.
A tax credit may be available to your business for premiums it pays on behalf of employees.
The plans offered in the SHOP Exchange will meet the Affordable Care Act's health-care reform mandates, which include providing at least the 10 categories of essential health benefits, limiting participant cost sharing and having the plan pay at least 60% of the value of benefits provided.
The first date that coverage could begin was January 1, 2014. Employers also can take advantage of rolling enrollment on a monthly basis throughout the year. Special enrollment is available for qualifying employees and their dependents.
Please contact Paul if you would like to discuss the tax implications and benefits of offering health insurance to your employees through a SHOP Exchange. Click here to contact Paul.