Wednesday, March 28, 2012

Small Business Insurance Exchanges

One of the many provisions of the Affordable Care Act is the establishment of state based exchange programs for small businesses, known as the Small Business Health Options Program aka SHOP.
Every state is required to establish SHOP exchanges ready for the first open enrollment period in October 2013 for coverage that will be effective January 1, 2014.
SHOP Goals
SHOP will allow small businesses to pool together to increase their purchasing power to the same level as that of large corporations.
This will make it easier for them to review, compare and purchase health care plans that offer their employees choices in coverage at rates similar to those available to large corporations.
Each SHOP exchange must perform the following functions:
  • Selection and certification of the health plans that will be offered
  • Consumer education and assistance
  • Eligibility determinations
  • Plan enrollment
  • Premium billing and collection
What businesses are included?
SHOP exchanges will serve small companies, defined as those having no more than 100 employees, on average.
However, during the first two years, states may restrict participation in SHOP exchanges to businesses having up to 50 employees.
Beginning in 2017, states may elect to let larger companies participate.
Do you have to participate?
There is no requirement that small businesses use the exchanges. They will still have the option of buying insurance outside of the exchanges.
Employers may also choose to self-insure to avoid many market regulations and the requirement for community rating, which requires premium costs to be the same for everyone, regardless of their age or health status.
How will SHOP function?
Each state can set up a SHOP exchange as an executive branch agency, an independent government authority, or a nonprofit corporation.
Alternatively, states may partner with other states to form regional exchanges or they may create subsidiaries within a state as long as the geography of the entire state is covered.
If a state chooses not to establish a SHOP exchange, or if it's determined that an exchange will not be fully operational in time, the federal government will set up and operate the exchange.
Tax credits for participating
One of the law's provisions that have many small business owners happy is the small business health care tax credit.
This allows businesses with fewer than 25 full-time employees that pay at least 50 percent of total premiums to qualify for a tax credit of up to 35 percent of their premium contributions.
And that credit increases to 50 percent in 2014.

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