Under the Patient Protection and Affordable Care Act (ACA), an employer with 50 or fewer full-time employees or full-time equivalent employees is classified as a small employer. The ACA does not require small employers to offer health insurance to their employees, nor does it require small employers that choose to make health insurance available to their employees to contribute to employee costs.
One of the key features of the ACA is the creation of Health Insurance Exchanges, or Marketplaces, for the sale of health insurance. States are charged with determining whether to establish their own state-run Exchange or to have the Department of Health and Human Services (HHS) operate one in the state as a federally facilitated Exchange. A third option is for states to have a Partnership Exchange, which is governed by both the state and HHS. Regardless of what governmental entity operates the Exchange, each Exchange will have a Small Business Health Options Program or SHOP.
Small employers that wish to make health insurance coverage available to their employees can choose to offer those employees coverage from the SHOP. Should a small employer decide to offer this type of coverage, it has the ability to select which plans to make available to its employees – and it is not required to offer all coverages sold through the SHOP to its employees. However, if a small employer determines that SHOP plans will be made available to its employees, then all full-time employees must be offered this coverage.
Making coverage available to employees through SHOP enables a small employer to control the coverage offered and the amount that the small employer contributes toward employee premiums. Specifically, four categories of insurance plans are offered through the SHOP: Bronze, Silver, Gold and Platinum. These categories differ in terms of the cost-sharing between the small employer and the employee and the out-of-pocket expenses for health care. Generally speaking, across plans and on a sliding scale, a Platinum plan has the highest monthly premium but the lowest out-of-pocket costs and the Bronze plan has the lowest monthly premium with the highest out-of-pocket costs. It is important to note that all plans have to contain the essential health benefits as set forth under the ACA, regardless of category.
Small businesses offering SHOP coverage to their employees may be eligible for the Small Business Health Care Tax Credit if the business has fewer than 25 full-time equivalent employees earning an average of approximately $50,000 or less annually. As of 2014, this tax credit is valued at 50 percent of the employer’s contribution toward employee premium costs.
Open enrollment for SHOP coverage begins on October 1, 2013, and coverage will become effective January 1, 2014. Commencing in 2016, the SHOP will be open for employers with up to 100 full-time equivalent employees.