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Pros and Cons of Small Business Health Options Program Health Plans

A Small Business Health Options Program health plan can provide employers with a substantial benefits package, but other plans may be cheaper.

A SHOP health plan can provide small employers with comprehensive benefits.

Source: Thinkstock

By Thomas Beaton

- Health plans offered through the Small Business Health Options Program (SHOP) exchanges allow payers to provide the nation’s smallest businesses with affordable plan options that offer critical health benefits.

SHOP health plans operate under separate exchanges from the individual health plan marketplace.

The SHOP market has undergone some significant administrative changes in recent months. Federal agencies have redesigned how small businesses can purchase and enroll in SHOP plans.

Small businesses that can find the right SHOP plan can receive a comprehensive health benefits package with cost alleviation options like state and federal subsidies.

With 27.7 million small businesses operating in the US, payers that can connect small business owners with SHOP coverage may have an opportunity to capture a lucrative segment of the employer-sponsored insurance market.

What is a SHOP plan and how can small businesses enroll?

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Healthcare.gov defines a SHOP health plan as a plan that provides businesses with 1 to 50 employees with health and/or dental benefits. SHOP plans use a metal-tier structure just like individual health plans to determine benefits and cost sharing rates.

There are three major qualifications for businesses to enroll in a SHOP plan.

Small businesses are required to provide coverage to at least one full-time employee (working 30 or more hours a week) who isn’t an owner, spouse, or business partner.

Individual state rules for SHOP participation rates require SHOP businesses to cover between 0 percent and 75 percent of their full-time employees to qualify for enrollment.

Small businesses are also not required to provide SHOP benefits to part-time employees, according to federal law.

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An employer looking for SHOP coverage needs to find a primary SHOP insurer in their state. Small businesses with out-of-state full-time employees must consult with a SHOP broker to provide compliant coverage at both the state and federal level.

SHOP health plans are offered by private payers and are available for purchase through SHOP-specific insurance brokers or through the payer itself.

Employers can use a full-time employment calculator to determine if their business qualifies for SHOP. Small businesses can also access a quick premium checker to see what the lowest available premiums are for their plan.

What are the small business benefits of SHOP enrollment?

Many smaller businesses can qualify for SHOP Tax Credits and Premium Assistance Programs to offset the costs of ensuring employees.

Small businesses purchasing SHOP plans can qualify for the tax credit if they have fewer than 25 full-time employees, have an average employee salary of $50,000 or less per year, pay for at least 50 percent of their employees’ premiums, and currently provide SHOP benefits to employees.

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SHOP businesses in the states of Alabama, Arizona, Georgia, Indiana, Kansas, and Oklahoma can receive generous premium assistance packages from their states.  For example, in Oklahoma a small business could receive assistance that covers up to 60 percent of premium costs, if the business meets specific employer and employee requirements.

Small businesses can also enroll in SHOP coverage at any time during the year, making them a flexible insurance option for employers.

SHOP insurance provides employees with essential health benefits such as preventive care, outpatient services, prescription drug treatments, and emergency care.

These health plans can also be used as a medical only, dental only, or combination health plan. For example, an employer could purchase a SHOP dental plan if they already an ACA-compliant medical plan to enhance their benefits package.

What are the challenges of offering SHOP coverage?

Payers offering SHOP insurance may face emerging challenges in competitive markets as federal agencies continue to approve the sale of limited insurance policies.

The federal expansion of association health plans (AHPs) could offer businesses a cheaper alternative. AHPs allow individuals and industry groups to sponsor their own health plans with low premiums.

AHPs also operate in a separate market from the ACA and aren’t required to provide essential health benefits or protect high-risk patients from discriminatory enrollment practices.  Payers will need to help potential customers balance the ability to offer low premiums with providing a meaningful coverage package.

SHOP plans are ACA-compliant, but could be challenging for small businesses to find since they are not available on the federal marketplace.

CMS removed the SHOP health plan directory from Healthcare.gov for plan year 2018 and beyond.  The agency requires employers to purchase a plan through a broker or the payer directly. Employers also must fill out a SHOP eligibility determination form to enroll and re-enroll in health plans.

The lack of a centralized place to buy coverage could create confusion for small businesses looking for a new health plan.

How can payers successfully offer SHOP coverage?

Payers that offer SHOP insurance to small businesses can use value-added benefits to entice smaller businesses to select SHOP coverage instead of a cheaper alternative.

Ross Weiler, Principal at Day Health Strategies, says that providing high-performance networks and implementing programs to address chronic diseases could position ACA-compliant small group plans as a market standard.

“Payers could add value through high-performing, tiered networks or perhaps through more robust clinical programs and a combination of value-added services to members,” Weiler said. “Payers would [additionally] benefit by developing, implementing and effectively deploying programs to engage chronic or high-risk members to manage their health earlier before a disease or an illness occurs."

He added that an AHP or other low-cost competitors may not have the capabilities to provide high-quality plan benefits, which can be used as a major marketing point for small business plans under SHOP.

Value-added benefits such as telehealth and adjusted cost sharing could also help payers position SHOP plans as a convenient and beneficiary-focused option.

Commercial payers must work to connect small businesses to brokers, or their own landing pages, to help small businesses purchase a SHOP plan. Targeted marketing efforts and communication materials should educate small businesses on how to enroll in a SHOP plan, and if small businesses meet state and federal requirements for enrollment.

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