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Small Business Employee Benefits and HR Blog

SHOP Exchanges Struggling to Offer Employees Choice

The Small Business Health Options Program ("SHOP Exchange") was meant to give small business employees more choice over their health plan. With the SHOP's "employee choice" feature, small businesses can offer employees a menu of plans to choose from - a type of defined contribution modelHowever, this feature was delayed in most state SHOPs in 2014. And now, it appears that at least 18 states will lack this feature in 2015 as well.

But with presumably low enrollment numbers, and better health insurance options for small businesses... does it really matter?

SHOP_Exchange_Employee_Choice

18 Federally-Run SHOP Exchanges Opting Out of "Employees Choice" in 2015

According to HHS, State Insurance Commissioners had the option not to implement "employee choice" in their state's SHOP Exchange in 2015.

In total, 18 of the 32 states using a federally-facilitated SHOP will not offer "employee choice". The remaining 14 states using a federally-facilitated SHOP will join most of the state-run SHOPs and make "employee choice" available to small businesses in 2015.

States Not Offering "Employee Choice" on the Federally-Run SHOP in 2015
  • Alabama
  • Alaska
  • Arizona
  • Delaware
  • Illinois
  • Kansas
  • Louisiana
  • Maine
  • Michigan
  • Montana
  • New Hampshire
  • New Jersey
  • North Carolina
  • Oklahoma
  • Pennsylvania
  • South Carolina
  • South Dakota
  • West Virginia
States Offering "Employee Choice" on the Federally-Run SHOP in 2015
  • Arkansas
  • Florida
  • Georgia
  • Indiana
  • Iowa
  • Missouri
  • Nebraska
  • North Dakota
  • Ohio
  • Tennessee
  • Texas
  • Virginia
  • Wisconsin
  • Wyoming

Note: These lists do not include states running their own SHOP Exchange. (Source: CMS)

Better Small Business Health Insurance Options

National SHOP enrollment numbers have not yet been released, however it's speculated that interest and enrollment has been low. Although the SHOP Exchanges seemed attractive on the surface, it is still a group health insurance plan and it doesn't address the core problem that group health insurance is broken.

Small businesses hoped the SHOP exchanges would help them offer affordable health benefits that give employees choice. But instead:

  • Competition is low in the SHOP Exchanges (i.e. in most states there is still little choice for employees, and little competition to drive costs down).

  • Premiums cost more in the SHOP exchange policies (i.e. the premiums are still cost prohibitive for most small businesses).

  • Premium subsidies are only available in the individual exchanges (i.e. providing further cost incentive to send employees to the individual market). 

  • In most states, employees do not have choice over selecting a plan with the SHOP.

Because of the core issues with the group health insurance market, and the new opportunities on the individual health insurance market, many small businesses are passing up the SHOP exchange in favor of contributing to a pure defined contribution health plan. With a defined contribution health plan, employees receive a set monthly healthcare allowance to spend on their choice of qualified, individual health insurance.

Read more about why small businesses are passing up the SHOP for individual policies and defined contribution.