Under the Affordable Care Act, open enrollment for the individual health exchanges, or HEXs, begins Oct. 1, 2013. The outlook for the Small Business Health Options Program, or SHOPs, through which small employers may buy health insurance is a bit more complicated. Here’s where things stand.
Health insurance exchanges
As envisioned by the Department of Health and Human Services (HHS), individuals will be able to buy health insurance policies through the HEXs. States may create their own HEXs, and may create SHOPs. Alternatively, states may partner with the HHS, or just let the HHS carry the full freight. To date, 18 states will run their own HEXs, seven states will work in partnership with the HHS and 26 are undecided or will let the HHS run the show.
Health insurers, with help from the HEXs, will determine whether individuals are eligible for premium tax credits or other cost-sharing reductions, and how much. However, in order for this system to work as planned, employees will need to contact their employers to determine whether the group health plan meets minimum value and affordability standards.
Recap: Group coverage is affordable if employees don’t contribute more than 9.5% of their household income for self-only coverage for the lowest cost plan; coverage provides minimum value if employees pay no more than 40%. Three safe optional harbors apply in lieu of 9.5% of employees’ household income.
According to a 12-page draft enrollment form, employees will present a form to you, called an Employer Coverage Tool, asking for the following information:
- The employer’s name, address, phone number and federal Employer Identification Number, and the name, phone number and email address of a contact person
- Whether employees are eligible for coverage and when
- Whether dependents are eligible for coverage
- The lowest-cost self-only plan that meets minimum value standards into which employees could enroll
- How much employees would have to pay in premiums, and how often
- Whether changes are contemplated for the next plan year.
According to the draft form, employees won’t file the Employer Coverage Tool with their HEX application. See a copy of the draft form at the Centers for Medicare & Medicaid Services' website.
DECLINE TO ANSWER AT YOUR PERIL: Full-time employees who could have enrolled in group coverage, either during open enrollment or a special enrollment period, and who didn’t enroll, aren’t eligible for a premium tax credit. Upshot: If a HEX has no information on your group plan, and employees enroll in individual coverage and qualify for a premium tax credit, you set yourself up to pay a free-rider penalty unnecessarily.
Full-time employees who are eligible for Medicaid aren’t eligible for premium tax credits, so not offering group coverage to them won’t trigger a free-rider penalty. Twist: States aren’t obligated to expand their Medicaid rolls. Employees in states that don’t expand their rolls may be eligible for premium tax credits, which could trigger free-rider penalties. To date, 28 states have opted to expand their rolls, 20 won’t and three are undecided.
States may define small employers as either employers with 100 or fewer employees, or employers with 50 or fewer employees during the preceding calendar year. To determine whether you have 50 employees, use the same counting method that you use to determine whether you’re a large employer for free-rider penalty purposes. (See “IRS issues regs on employer play-or-pay provision.")
As anticipated by the HHS, SHOPs will accept a single, streamlined application form from employers and employees and will facilitate employees’ enrollment into the group plan. Through the SHOP, employers may offer employees an array of plans within the same coverage level, or only one plan, as is commonly done now. On a monthly basis, SHOPs will bill employers, collect the total amount due and remit those amounts to the group plan issuers.
However under a transition rule that applies to the 2014 plan year, what SHOPs can and can’t do depends on whether they’re state or federally run.
- State-based SHOPs may, but aren’t required to, allow employers to offer employees an array of plan choices and aggregate premiums. Employee choice and premium aggregation will begin with the 2015 plan year.
- For federally operated SHOPs, employers can offer only one plan to employees. Since only one plan may be offered there is no need to aggregate premiums. Employee choice and premium aggregation will begin with the 2015 plan year. (78 F.R. 33233, 6-4-13)
TYING IT UP: See exactly where you stand in this chart summarizing the states’ positions on HEXs and whether they will expand their Medicaid rolls.
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