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Small Business Employee Benefits and HR Blog

Small Business SHOP Marketplaces - Key Provision Delayed Until 2015

Released yesterday, the Obama Administration is delaying a key portion of the federally-run SHOP Marketplace, in which small businesses can offer a choice of health plans to their employees through the public marketplace (a sort of defined contribution model). Instead, small businesses will be limited to offering a single plan through the federally-run SHOP Marketplaces until 2015.

SHOP Marketplaces

SHOP Marketplaces - Plan Choices Delayed

The plan choice option, already available to many big businesses, was supposed to become available to small employers via the federally-run SHOP Marketplaces in January 2014. But administration officials said they would delay it until 2015 in the 33 states where the federal government will be running the SHOP insurance marketplaces. And, they've delayed the requirement for the other states as well (although a few states running their own exchanges, including California and Connecticut, said they planned to offer an employee choice option next year, despite the delayed requirement by the federal government).

According to a recent NY Times article, "The delay will 'prolong and exacerbate health care costs that are crippling 29 million small businesses,' said Senator Mary L. Landrieu, Democrat of Louisiana and the chairwoman of the Senate Committee on Small Business and Entrepreneurship."

Read on for a complete overview of the SHOP Marketplaces.

SHOP Marketplace - What is it?

As part of Affordable Care Act (ACA), states are required to provide a Group Market Health Insurance Exchange for businesses (called the Small Business Health Options Program or "SHOP"). The SHOP Marketplace is essentially a public group health insurance exchange that will be available for small businesses starting January 1, 2014. The new program was designed to simplify the process of finding health insurance for small businesses, and applying any applicable tax credits.

As with the individual health insurance marketplaces, all states have three options for offering a SHOP marketplace: create their own state-run marketplace, join a federal-state partnership, or default to the federally-run SHOP marketplace.  As mentioned above, 33 states are expected to default to the federally-run marketplace.

Initially, the SHOP marketplaces are for businesses with up to 100 employees.  However, states can limit participation to businesses with up to 50 employees until 2016, so eligibility will vary by state.

How Can Health Insurance Professionals Benefit from the SHOP?

According to ACA Section 1312(e), the Secretary will establish procedures under which states may allow agents or brokers to be a Navigator to:

  1. Enroll individuals and small employers in qualified health plans, and 

  2. Assist individuals in applying for premium tax credits and cost-sharing reductions in exchanges.

Insurers are not prohibited from paying agents and brokers for their services. While the yet-to-be-issued procedures will clarify how this will work, it appears that agents and brokers can be paid by insurers for enrollments (as they are now) or can be paid a fee by the exchange, but when they are paid by insurers, they cannot simultaneously get grants to act as navigators.  

For more information see: What is a Health Insurance Navigator?

Unlimited Plan Choices through "Pure" Defined Contribution Health Plan

Another option exists for small businesses now, and in 2014 and beyond: a "pure" defined contribution health plan. With pure defined contribution, a small business:

  • Gives tax-free healthcare allowances to employees (using a Healthcare Reimbursement Plan, or HRP)

  • Employees shop for personal policies on the private or public marketplaces

  • Employer reimburses employees tax-free, up the amount of their allowance 

With pure defined contribution, employees essentially have unlimited choice in insurance policies to choose from.  A pure defined contribution solution allows an employer get out of the health insurance business, so they can focus on their customers.