Confusion Created By Small Business Health Options Program (SHOP)

The Patient Protection and Affordable Care Act (PPACA) has caused a lot of confusion for all concerned. One area of particular confusion for small businesses is the Small Business Health Options Program (SHOP).

Employers with more than 100 full-time employees, beginning January 2015, will be required to offer affordable health coverage that meets a “minimum value,” or be required to pay an Employer Shared Responsibility Payment. Employers with between 50 and 100 employees will be required to do the same beginning in January 2016.

Employers with fewer than 50 employees will not be required to offer health coverage. One of the options they can use, if they voluntarily choose to do so, is a network of federal and state-run exchanges know as the SHOP marketplace.

The main purpose of SHOP, when it was included in the ACA, was to decrease costs for small businesses that wanted to provide health coverage to their employees.

Another purpose of SHOP is to provide incentives for certain businesses to participate. To qualify for the tax credit, all of the following must apply:

• You have fewer than 25 full-time equivalent (FTE) employees
• Your average employee salary is about $50,000 per year or less
• You pay at least 50% of your full-time employees’ premium costs
• You offer coverage to your full-time employees through the SHOP Marketplace

The tax credit is worth up to 50% of your contribution toward your employees’ premium costs (up to 35% for tax-exempt employers).

You don’t need to offer coverage to your part-time employees (those working fewer than 30 hours per week) or to dependents to qualify for the tax credit.

Some of the specific challenges that SHOP has faced and continues to face, are:

Technical Glitches. The SHOP option has been available to small business owners since October 2013. Business owners have been forced to rely on paper applications, due to technical problems on the federal SHOP website, if they operated businesses in states without state SHOP exchanges.

Employee Concerns. There is concern that small businesses may be doing a disservice to their employees by offering SHOP. The tax credits are only available to businesses with a high percentage of low-income workers who also might be eligible for Medicaid coverage or for significant subsidies if they purchased their own insurance on the individual exchanges. Employees would be prevented from purchasing insurance on the individual exchanges which might end up being less expensive than premiums they would pay by participating in a SHOP plan.

Limited Plan Availability. Companies are only allowed, by a handful of states, to offer employees a selection of health insurance plans via the SHOP exchanges. Only one plan is offered by the majority of states for all employees. Access to smaller networks of health care providers, such as doctors and hospitals, are provided by many of the SHOP plans unlike health plans purchased on the private market.

Lack of Professional Guidance. Private plans can be purchased, by businesses with 50 or fewer employees, directly through insurance brokers or provider, or the plans can be purchased through a state or federal SHOP in almost every state. Lack of involvement by insurance professionals in SHOP could cause problems for most small businesses.

Lack of Publicity. Very few small business owners are even aware of SHOP and many of those who have heard of it don’t really understand it. This might be the most significant challenge that is faced by SHOP. Covering New Hampshire, a group focused on spreading the word about the health insurance marketplace in the state of New Hampshire, commissioned a survey that found that nearly 60 percent of small businesses who responded were not familiar with SHOP. Nearly 70 percent of respondents said they were interested in learning more about the law in general.

If you are a current Paypro Client, your dedicated Benefits Specialist is available to answer your questions and guide you. To learn how Paypro can assist your organization in Benefits Administration visit our Employee Benefits Solutions’ page or contact us for more information.

Are you prepared for the 2015 ACA Employer Mandate? If you have 50 or more employees click here to view our recorded webinar to get answers to any questions you might have.