‘SHOP’ offers small businesses more choice when it comes to health insurance

Instead of choosing a single health care plan for employees, imagine offering them a wide variety of plan options from various insurance companies.

“Employee Choice,” a new feature of the Affordable Care Act’s Small Business Health Options Program (SHOP) Marketplace, now affords that opportunity. Wisconsin is one of 14 states offering Employee Choice for 2015.

Employers with 50 or fewer full-time equivalent employees can elect to offer Employee Choice when they apply for SHOP coverage online at www.health care.gov/small-businesses. While SHOP was available for 2014, this is the first year small employers can apply online.

“There’s been a push toward giving employees more choices when it comes to health insurance,” said Sarah Fowles, an employee benefits attorney at Milwaukee-based Quarles & Brady LLP. “Some employees, for example, might be comfortable with a higher deductible, and others might want a lower deductible option in exchange for paying a higher premium.”

Employee Choice allows employers to select a plan category (Bronze, Silver, Gold or Platinum) to offer to employees. Employees can then choose any plan in the selected category from any insurance company participating in SHOP in their area.

The array of choices will vary based on location and the number of insurers who participate in the SHOP Marketplace, according to Fowles. Thus, an employer might be able to offer anywhere from two to 20 options, for example, through Employee Choice.

The number of options for a company will be identified once the employer fills out an application, but it is likely Wisconsin companies may have a good amount of options, as Fowles said the state has a robust insurance market. That said, there are more insurers providing coverage in Milwaukee County than in remote areas of the state.

Despite the advantages of Employee Choice, Fowles said it does have a few drawbacks.

For one, private employers are required by the Employee Retirement Income Security Act to provide employees with numerous disclosures about their health coverage.

“If you have a bunch of employees enrolled in different plans by different insurers, the disclosure obligations get really complex and could get confusing from the employer’s perspective,” Fowles said. “When there’s one insurer, it’s easier to manage the flow of information.”

Currently, employers work with insurance brokers who in turn work with insurers, but she said another potential downside of Employee Choice is that it adds a fourth entity, SHOP.

“When you add another person or entity to the mix it just ups the possibility that mistakes can be made,” she said.

For those small employers that are interested, Fowles noted that it would be advantageous for them to apply for SHOP coverage between now and Monday, Dec. 15. Ordinarily, 70 percent of employees who are offered coverage must enroll in a plan in order for a company to participate in SHOP, but that minimum participation requirement is waived if an employer applies by Dec. 15.

“That requirement can be difficult for some employers,” she said. “To get 70 percent of employees to sign up, employers have to contribute more. That can be a real sticking point for small employers, and that’s why many don’t offer insurance.”

Although the 70 percent requirement would be enforced after Dec. 15, employers can apply for SHOP coverage anytime during the year. There is no restricted enrollment period like there is in the Individual Marketplace.

In addition, Fowles said that some employers may be eligible for the Small Business Health Care Tax Credit, which reduces the cost of premiums up to 50 percent depending on the type of employer and size of the business.

She said only employers who wish to claim the tax credit are required to contribute at least 50 percent of the premium cost of employee-only coverage. They may also offer dependent coverage but would not be required to contribute anything toward the cost.

Employers who are not going to claim the tax credit, however, are not required to contribute anything toward the cost of their employees’ coverage or the cost of dependent coverage.

Either way, small employers are not required to purchase SHOP plans that offer dependent coverage, Fowles said.

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