The document summarizes updates to the Small Business Health Options Program (SHOP) from the Centers for Medicare and Medicaid Services (CMS). It discusses which states are utilizing federally-run SHOP exchanges versus state-run exchanges. It also summarizes CMS guidance on eligible employers and employees, coverage options, enrollment periods, premium calculations, and the interaction between SHOP and the small business tax credit.

1. CBIZ Health Reform Bulletin
Subject: Small Business Health Options Program (SHOP) Updates
Date:
October 31, 2013
One of the components of the Affordable Care Act is the Small Business Health Options
Program (SHOP).
The SHOP is the marketplace, sometimes referred to as “exchange”,
specific to small employers.
STATUS OF MARKETPLACE ESTABLISHMENT
To date, 26 states are utilizing a federally-facilitated marketplace/exchange (FFE), 17 states
plus the District of Columbia have established their own marketplace/exchange, and 7 states
are operating a federal/state partnership marketplace, as follows.
Alabama
Alaska
Arizona
Florida
Georgia
Indiana
Kansas
States Utilizing Federally-Facilitated Marketplace
Louisiana
North Carolina
Maine
North Dakota
Mississippi
Ohio
Missouri
Oklahoma
Montana
Pennsylvania
Nebraska
South Carolina
New Jersey
South Dakota
California
Colorado
Connecticut
District of Columbia
Hawaii
State-Run Marketplace
Idaho
Nevada
Kentucky
New Mexico
Maryland
New York
Massachusetts
Oregon
Minnesota
Rhode Island
Tennessee
Texas
Virginia
Wisconsin
Wyoming
Utah*
Vermont
Washington
*In Utah, the state operates the SHOP; individuals utilize the FFE for selecting coverage.
Arkansas
Delaware
State/Federal Partnership Marketplace
Illinois
Michigan
Iowa
New Hampshire
West Virginia
Recently, the Centers for Medicare and Medicaid Services (CMS) issued policy and guidance
regulating the management and operations of SHOPs specifically as it relates to type of
coverage offered, employer applications, enrollment procedures, enrollment timeframes,
minimum participation standards, and calculation of employer and employee premiums and
contributions. Following are highlights of this guidance. This review relates primarily to the
federal SHOP; a state-SHOP may have additional requirements.
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2. CBIZ Health Reform Bulletin
COVERAGE AND ENROLLMENT
An employer eligible for the SHOP must meet 3 criteria:
1. It must be ‘small employer’, defined as an employer employing between 1 and 100
employees. Employer size is determined based on the prior calendar year; both fulltime employees and full-time equivalent employees are counted. (For 2014 and 2015,
a state may define small employer as one employing 1 to 50 employees. States may
open their marketplaces to large employers in 2017);
2. The coverage must be offered to all full-time employees, defined as individuals working
30 or more hours per week; and
3. The employer’s principal office must be within the SHOP’s geographic area.
In order to enroll in coverage through a SHOP, employers and employees are required to
complete applications to determine their eligibility for coverage. The SHOP is based on an
employee choice model pursuant to which the employer will select a metal tier of coverage and
the employees choose any plan within that tier; in some instances, the employee may even be
able to move up a tier. The metal tiers are categorized based on the level of benefit coverage,
i.e., Bronze (covers 60% of total average costs of care), Silver (70%), Gold (80%) and Platinum
(90%).
In 2014, employers utilizing a federally-facilitated SHOP (FF-SHOP) can only choose one
qualified health plan (QHP) at a single metal tier of coverage for their employees. A state can
choose to make the full metal tier available, or limit it to one plan like the FF-SHOPs.
Beginning in 2015, all SHOPs are required to offer all plans within a single metal tier of
coverage.
Once an employer enrolls through a SHOP and employees elect the employer’s offer of
coverage, the SHOP then provides enrollment information to the relevant QHP issuer (insurer).
INITIAL AND ANNUAL OPEN ENROLLMENT PERIODS AND COVERAGE
Initial open enrollment in the FF-SHOP began October 1, 2013.
The effective date of
coverage is based upon the date selected by the employer as part of the application and
enrollment process, as follows:
Plan Selection Date
10/1/13 through 12/15/13
Between the 1st and 15th day of the month
Between the 16th and last day of the month
Effective Date of Coverage
1/1/14
1st day of the following month
1st day of the second following month
Employer plans are issued on a 12-month basis. Open enrollment and renewal periods will
occur on a rolling basis throughout the year. Employers will receive renewal notices from the
FF-SHOP at least three months prior to the end of the plan year and have 30 days to respond
to the renewal offer. If the employer opts to renew the coverage, then the SHOP will then
notify employees about their coverage options for the subsequent year.
Employees have up to 30 days to either accept or waive coverage, as well as add dependents
or make changes to their QHP coverage during this open enrollment period. Both the
employer’s plan offerings and employee coverage decisions must be submitted to the SHOP
by the 15th of the month prior to the end of the employer’s plan year in order to be timely
effective for the beginning of the following plan year.
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3. CBIZ Health Reform Bulletin
Delay in On-line Enrollment Process. In late September, HHS announced a delay in the
availability of electronic enrollment in a SHOP November, 2013. Updates since have moved
the electronic enrollment availability to the end of November, at the earliest. According to the
news release, as long as employers and employees complete the enrollment process by
December 15, 2013, coverage will begin January 1, 2014.
SPECIAL ENROLLMENT PERIODS
A SHOP must provide for a 30-day special enrollment period during which qualified individuals
may enroll in QHPs or change QHPs upon the occurrence of certain life events. These events
are:
 Addition of a dependent as a result of marriage, birth, adoption, or placement for foster
care;
 The covered employee or dependent loses minimum essential coverage due to job loss
or loss of QHP certification;
 The employee moves to a new state and gains access to employer health coverage;
 An employee’s enrollment or non-enrollment in a plan is the result of the error,
misrepresentation, or inaction by the Marketplace or by HHS; or
 Violation of a contract provision as proven by the covered employee.
The affected employee must notify the SHOP of a life event that triggers a special enrollment
period within 30 days of the event. An employee who becomes eligible or loses eligibility for
Medicaid or the Children’s Health Insurance Program (CHIP) would have 60 days from the date
of the event to notify the SHOP. If the employee fails to timely notify the SHOP of the event,
then he/she would have to wait until their next annual enrollment period to make a change.
MINIMUM PARTICIPATION RULES
A SHOP can impose a 70% participation requirement unless a state requires a higher
standard. States that currently require employers to meet a minimum 75% participation rate
are Arkansas, Iowa, New Hampshire, New Jersey, South Dakota and Texas.
For participation purposes, all employees, including full-time, part-time employees, COBRA
continuees, retirees participating in the employer plan, and business owners, as well as those
buying individual coverage are included in the calculation. Employees covered by another
employer group health plan, or by a government program such as Medicare, Medicaid or
TRICARE, need not be counted.
The minimum participation rate is calculated only upon initial enrollment and renewal. Midyear fluctuations in a group’s participation rate will generally not affect eligibility for coverage.
However, if a group falls below the minimum participation standard at renewal, then coverage
would likely not be renewed. In this instance, an employer could re-apply for coverage at
another time during the year when it could meet the minimum participation standard.
PREMIUMS AND CONTRIBUTIONS
For purposes of determining premium, the SHOP will offer the employer a choice between a
composite rating formula, or an age-rating formula, unless a state specifies the rating
methodology. Premiums for QHP coverage offered through a FF-SHOP are calculated based
on the employer’s selected QHP and the number of employees who accept the offer of
coverage. The total group premium is determined by adding the per-premium for each
participant and beneficiary covered under the plan, adjusted by the applicable geographic
rating are, based on the employer’s principal place of business.
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4. CBIZ Health Reform Bulletin
Once the premiums are totaled, the amount is then divided by the number of employees
electing coverage to get the average employee contribution rate. The employer would then
apply the same percentage of its contribution for employee-only coverage, with the employee
paying the balance, subject to any applicable tobacco surcharge. This same procedure in
determining premium calculations and employer and employee contribution rates applies if the
employer also selects dependent coverage and/or dental coverage, in addition to the medical
coverage.
Example. If the youngest employee enrolling has a premium of $100 and the oldest
employee enrolling has a premium of $120, the average premium for everyone would
be $110. If the employer decides to contribute 80% (or $88) towards the premium
payments, each employee would pay $22. If an employee adds 2 dependents to the
coverage plan, an additional premium amount will be added for the employee based on
the ages of the dependents. The employer’s contribution of 80% (or $88) for its
employees will remain the same.
The employer’s contribution percentage toward premium cannot vary based on work status of
employee, i.e., the employer contribution percentage must be the same for all of its full-time
and part-time employees, and cannot vary based on employee classes.
Part of the SHOP application includes an employee worksheet for estimating premiums and
determining coverage. Because an employer may not know whether any of its employees or
their dependents would participate in the employer’s plan selection, CMS encourages
employers to collect the relevant information from its workforce prior to making application for
SHOP coverage. The more accurate the information provided by the employer would likely
result in a more precise estimate of premium.
It is important to note that generally, coverage bought through the marketplace cannot be
purchased with salary reduction dollars via IRC Section 125 (cafeteria) plan. The only
exception to this is coverage purchased through the SHOP.
WAITING PERIODS
Beginning January 1, 2014, the ACA mandates that waiting periods can be no longer than 90
days. During the initial application process through a SHOP, an employer can select its new
hire waiting period from a choice of zero days, up to 60 days. The 60-day waiting period option
is the maximum selection to ensure that coverage becomes effectuated by the maximum
allowable period of 90 days.
NOTIFYING EMPLOYEES ABOUT SHOP COVERAGE
Once the employer completes its application for coverage through the SHOP, selects the
coverage, determines its contribution toward coverage and submits a roster of its employees,
the SHOP will then send an e-mail to all employees identified on the roster about the
availability of the employer coverage. The e-mail will include each employee’s unique access
code and a link to the SHOP website for purposes of completing the employee application.
Employers should ensure that the information provided in the employee roster is accurate as
they are ultimately liable for ensuring their employees are notified of available health coverage
through the SHOP. Presumably, this obligation is in addition to the Marketplace notice
required to be provided by all employers; though, no additional guidance has been issued on
this point.
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5. CBIZ Health Reform Bulletin
INTERPLAY WITH SMALL BUSINESS TAX CREDIT
The small business tax credit (SBTC) has been available to certain eligible employers for
several years now. Beginning in 2014, only QHP coverage purchased through the SHOP is
available for the SBTC, and only for a 2-consecutive year period. To be eligible, the employer
must employ fewer than 25 full-time equivalent employees whose average annual wages are
less than $50,000 (adjusted for inflation beginning in 2014). In addition, the small employer
must cover at least 50% of the cost of single (not family) health care coverage for each
employee. In addition, the employer must make a uniform contribution toward health coverage.
For tax years beginning in 2014 and beyond, the maximum credit increases to 50% of
premiums paid by small business employer (35% for small tax-exempt employers).
Additional Information about SHOPs:
 SHOP Marketplace (HealthCare.gov portal)
 Infographic: Five Steps for Employers to Apply for Coverage in the SHOP Marketplace
Background CBIZ Health Reform Bulletins relating to SHOPs:
 Small Business Health Options Program (6/3/13)
 Overview of Final Exchange Regulations (3/28/12)
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ
Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with
particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese
is based in the CBIZ Leawood, Kansas office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these
comments directed to specific situations. The information contained herein is provided as general guidance and may
be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute
for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific
situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages
whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other
factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that,
unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used,
and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal
Revenue Service.
October 31, 2013 – HRB 84
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