Small Business Health Insurance Options Program (SHOP) Explained

Small Business Health Insurance Options Program (SHOP) Explained

What is the Small Business Health Insurance Options Program (SHOP)

Small Business Health Insurance Options Program (SHOP) Explained ; The term SHOP is an acronym for Small Business Health Insurance Option Program. This program is a major portion of the Patient Protection and Affordable Act. and  part of the legislation allowing small businesses the ability to purchase affordable health insurance on the health insurance marketplace, similar to the individual plans starting October 1, 2013. This allows small business owners with 50 or less employees to shop and review multiple plans instead of going through the current system with a broker.

How do Small businesses purchase insurance today?

  1. When a small business is interested in providing insurance to their employees, multiple agents from local insurance agencies compete for their business.
  2. Once the employer chooses an agent/insurance company, the employer will buy a plan from one insurance company for all their employees.
  3. In many states the plan for the small business will be part of a small group insurance plan. Unfortunately if the small group has a unfavorable record of past claims, the cost of health insurance as part of that small group plan can be very costly to the small business.
  4. Due to the nature of health premiums, the cost of coverage fluctuates each year. Each year the small business owner waits to hear how much their plan will cost, if  the cost of the plan is extremely high the employer may have to shop again for another with the hopes of an improved deal, and reduced costs.
  5. All employees that are part of a specific group plan must accept the choice their employer makes with regards to Health Insurance plan selection. Unfortunately when an employer changes plans, some employees’ doctors may or may not be on the new plan, which often cause challenges and difficulties continuity of care.

How will Small businesses purchase insurance through the Small Business Health Insurance Options Program ?

  1. A small business owner will go to the  Small Business Health Options Program and select the level of coverage they are interested in offering – The offers will be based on the standard medal plans bronze, silver, gold, or platinum coverage, which differs only in copays of 40% to 10%.Additionally the employer will also set the limit of how much they are willing to contribute towards the cost of the insurance for their employees. Note: The minimum they can offer is 50% of the coverage plan.
  2. Once the employer setup their selection, the employees will have the ability to go on the exchange, and choose from a variety of insurance company that offer plan that meet the employers criteria– lifting the limitation of employees having one choice of health insurance provider.
  3. As part of the SHOP, and Affordable Care Act provisions there will no longer be group underwriting. All coverage and plans are based on four factors – age, premium rating area, number of members in the family, and tobacco use.
  4. Just as in previous employer sponsored plans, the employer will collect the employee portion of the premium from the employees, and pay the full premium cost to the exchange. The exchange will split the premium collected between all the insurance companies the employees are using. Additionally no broker will be needed for any of these transactions.

There was a note stating SHOP was delayed, what impact will it have on small business owners and employers?

The delay notice has caused many confusion, and is often misunderstood. The SHOP will still be open in 2014, however in the 33 states where the Federal Government will run Health Insurance Marketplaces, there will only be one health insurance choice.

If you are an employer in one of the state that is not solely run by the federal government, that state has the option to delay having their SHOP open in 2014. In 2015, it is expected that SHOPs will be fully operational as originally planned.

What are the business impacts of the SHOP Delay?

The delay means in the 33 states where the federal government are setting up Health Insurance Market places, it will be business as usual for the small group employers providing coverage until 2015

Where can I download a copy of the form for employers and employees that are participating in the Small Business Health Insurance Options Program ?

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