A health reform requirement that all insurers offer four levels of health coverage to small businesses would be delayed until 2015 under proposed rules scheduled to be published March 11 in the Federal Register. Under the U.S. Department of Health and Human Services proposal, small employers may get one choice of health coverage in 2014.
Starting in 2014, small businesses with up to 100 employees will have access to state-based health insurance exchanges under the Small Business Health Options Program. The levels of coverage are connected to actuarial value: bronze (60 percent), silver (70 percent), gold (80 percent) and platinum (90 percent). Facilitating employee choice at a single level of coverage selected by the employer – bronze, silver, gold or platinum – is a required SHOP function.
Employers can choose the level of coverage they want for their employees but SHOP plans would get a grace period for the year ending Jan. 1, 2015, during which they could offer just one coverage option.
HHS said that delaying the requirement until 2015 would give the insurance market time to adjust, foster competition among SHOP plans and allow small businesses to take part in insuring their workers (with some using federal insurance subsidies).
Gold, silver and bronze and platinum plans must be offered on the regular, non-SHOP exchanges beginning in 2014.
Special Enrollment
The new SHOP proposal also provides the following rules on special enrollment periods.
- Special enrollment periods in the SHOP are within 30 days of the triggering event. These special events are: (a) loss of eligibility for other private insurance coverage; or (b) a person becoming a dependent through marriage, birth or adoption. It does so to align SHOP rules with the length of special enrollment periods in group markets with existing HIPAA rules.
- If an employee or dependent becomes eligible for premium assistance under Medicaid or the Children’s Health Insurance Program or loses eligibility for Medicaid or CHIP, this would be a triggering event, and the employee or dependent would have a 60-day special enrollment period to select a qualified health plan.
Background
Several factors raise health insurance costs for small businesses, according to HHS. Because of poor economies of scale, they are forced to pay higher premiums and have nigher adminstrative costs per covered life than their larger counterparts. In addition, they lack bargaining power. The SHOP exchanges are designed to remedy these disadvantages, according to HHS. The agency said premiums for SHOP coverage will be cheaper by 4 percent for small businesses.
SHOP exchanges will include web portals to help small businesses shop for coverage.
In 2017, the pool of businesses eligible to buy SHOP coverage will expand to include those with more than 100 employees.
SHOP Coverage Can Result in Tax Credits
Nearly six million U.S. firms with fewer than 50 employees are exempted from health reform’s employer responsibility requirements, including its price and coverage mandates, according to the White House.
Small employers — those with fewer than 25 full-time equivalent employees and average annual wages of less than $50,000 — may be eligible for a tax credit for offering health benefits.
To get the tax credit, the employer must contribute at least 50 percent of total premium cost. For-profit small employers can get a tax credit to 50 percent of the amount they spent providing workers SHOP. Tax-exempt small businesses can get tax credits of up to 35 percent of their contribution, the White House stated.
Related Resources from Thompson Information Services
The Health Reform Law: What Employers Need to Know