The Affordable Care Act (ACA), also known as ObamaCare, has given small business owners new options in providing health insurance for their employees. Through the Small Business Health Options Program (SHOP) marketplace, small business owners who employ 50 or fewer full time equivalent (FTE) staff, including part-time employees, can review health insurance options and choose the best plan for themselves and their employees. For example, 2 half-time employees generally equal 1 FTE employee. Beginning in 2016, the SHOP will be open to businesses with up to 100 FTE employees.
Individuals who run small businesses that have employees are considered employers. Through the SHOP, owners can compare plans side-by-side and choose what coverage to offer. In addition, small businesses with fewer than 25 FTE employees making an average of about $50,000 a year or less may qualify for a small business health care tax credit worth up to 50% of the employer’s contribution to premium costs (or up to 35% of the contribution for a small tax-exempt business). Owners can still deduct the remaining non-covered premiums from taxes as a business expense. Small businesses may choose to purchase their health insurance plans through the SHOP or outside of the SHOP, but beginning in 2014 a business will only be able to take advantage of tax credits on plans purchased through the SHOP.
There are also new rules governing how health insurers issue policies and establish premiums that go into effect in 2014. These rules apply to plans purchased inside or outside of the SHOP. For example, insurers can no longer deny coverage to a group if its employees or their dependents have pre-existing conditions or are otherwise in poor health, and they can’t charge higher premiums to groups with more women, or sicker employees, as they have in the past. These changes are designed to protect consumers, regardless of whether they receive insurance through the SHOP or outside of it.
Understanding the SHOP Marketplace
The SHOP was created to provide small businesses with a simple way to compare and purchase health insurance to offer to staff. Advantages include comparing plans side-by-side for clear decision making, and the possibility of receiving a small business health care tax credit. Starting in 2014, SHOP will be available to employers with 50 or fewer FTE employees. Then in beginning in 2016, all SHOPs employers with up to 100 FTEs will be able to use it.
In a small number of states, small businesses can compare plans and purchase cover online. However in most states, a business must use an agent, broker, or other assister when purchasing coverage through the SHOP. Using a third party won’t change the amount the business pays to purchase insurance. Starting in November 2014, businesses will be able to purchase insurance online in every state.
It’s important to note that if a business purchases an insurance plan through the SHOP, they must offer health insurance to all of their full time employees. A full-time employee is defined by the government as someone working 30 hours or more per week.
Choosing the Best Plan for Your Business
To choose the best plan for your business, you will want to consider how much cost-sharing you and your employees will carry, and how much the plan will carry. While each type of insurance plan offers similar benefits, plans will be categorized based on the cost-sharing that they require. A Bronze plan have the lowest premiums and require the most cost to be carried by the enrollee, while a Platinum plan will require the least cost-sharing by the enrollee, but have the highest premiums. Keep in mind that the lowest-priced option may not be the one that provides the best value for you and your employees. For more information about the SHOP, you can view the Key Facts article from Healthcare.gov.
In many states, 70% of eligible employees must sign up for the offered plan in order for the insurance to go into effect. This applies to employers who purchase coverage inside or outside of the SHOP. The 70% number is based on employees that don’t have coverage though another employer plan, Medicare, Medicaid, the military, or veterans’ programs. This is a state regulatory issue that attempts to stop adverse selection. Many state laws allow health insurers to refuse coverage to employers who do not meet employee minimum participation or employer minimum contribution requirements. In New Jersey for example, carriers can decline to issue health insurance policies to employers if fewer than 75% of eligible employees enroll for coverage. For more information on this requirement, visit the Healthcare.gov question page.
The SHOP helps small business owners access health insurance they need for their employees, while letting them compare options and choose the plan that is best for their business needs. Knowing all of the possibilities and making the smartest choice for your individual business are the first steps to a healthy, happy future for you and your staff.