United States: Insurance Exchanges Will Help Small Businesses And Their Employees

Last Updated: April 15 2013
Article by Tracey L. Klein and Nicole S. Rosen

While employers understand the value of providing health insurance to their employees, doing so can be challenging for small businesses. Small businesses lack the purchasing power of larger employers and end up paying about 18% more than larger employers for the same health insurance policy.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act) aim to close this gap by offering certain small employers tax credits to offset the high cost of providing insurance and, starting in 2014, offering small employers (that employed an average of 1 to 100 employees in the preceding calendar year) the opportunity to purchase private health insurance through competitive marketplaces known as Exchanges. The Affordable Care Act requires each state that chooses to operate an Exchange to also establish a Small Business Health Options Program (SHOP) to assist eligible small businesses in providing health insurance options to their employees. SHOP Exchanges are particularly relevant to employers with between 50 and 100 employees, which are required to offer health insurance to their employees or be subject to the shared responsibility penalty.

On March 1, 2013, the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) finalized provisions that set forth standards for the administration of SHOP Exchanges to help ensure a competitive market in the SHOP (the Final Rule). HHS simultaneously issued a proposed rule (the Proposed Rule) that amends the existing regulations in two specific areas, as outlined below.

The Final Rule

Under the Final Rule, SHOPs function similar to Exchanges, but with several key exceptions. Specifically, SHOPs are not required to carry out certain functions required of Exchanges, such as those related to individual eligibility determinations or enrollment of qualified individuals, the requirement to issue certificates of exemption or requirements related to the payment of premiums by individuals, Indian tribes, tribal organizations and urban Indian organizations. However, that being said, SHOPs have unique functions, including, but not limited to, the following:

  • The SHOP must adhere to certain enrollment and eligibility requirements;
  • The SHOP must allow a qualified employer to select a level of coverage in which all qualified health plans (QHPs) within that level are made available to the qualified employees of the employer;
  • In addition to allowing employers to select a specific level of coverage, the SHOP may also allow the qualified employer to make one or more QHPs available to qualified employees by a different method than the employer choice method described above;
  • The SHOP must perform certain premium aggregation functions related to payment administration, including, but not limited to, providing each qualified employer with abill on a monthly basis that identifies the employer contribution, the employee contribution and the total amount that is due, collecting from each employer the total amount due and making payments to the QHP issuers for such amounts; and
  • The SHOP must ensure that each QHP meets certain requirements, require that all QHP issuers make any changes to rates at a uniform time (quarterly, monthly or annually) and refrain from varying rates for a qualified employer during the employer's plan year.

Qualified employers, for purposes of utilizing a SHOP, are small employers (with 1 to 100 employees) that either (1) elect to offer all of its full-time employees coverage in one or more QHPs offered in the small-group market through the SHOP covering its principal business address; or (2) elect to offer all of its employees coverage in one or more QHPs through the SHOP serving each employee's primary worksite.
In addition to initial and open enrollment periods, SHOPs must also provide special enrollment periods. Under the Final Rule, a qualified individual or enrollee has 60 days from the date of a triggering event to enroll in a QHP. The Final Rule defines triggering events to include, without limitation, circumstances when:

  • a qualified individual or dependent loses minimum essential coverage;
  • a qualified individual gains a dependent or becomes a dependent through marriage, birth, adoption or placement for adoption;
  • an individual who was not previously a citizen, national or lawfully present individual gains such status;
  • a qualified individual or enrollee gains access to new QHPs as a result of a permanent move;
  • a qualified individual's enrollment or nonenrollment in a QHP is unintentional, inadvertent or erroneous and is the result of an error, misrepresentation or inaction
  • of the Exchange or HHS;
  • an enrollee adequately demonstrates that the QHP in which he or she is enrolled in substantially violated a material provision of its contract;
  • an individual is determined newly eligible or newly ineligible for advance payment of a premium tax credit or has a change in eligibility for cost-sharing reductions; or
  • other exceptional circumstances exist.

Changes Set Forth in the Proposed Rule

The Proposed Rule, issued concurrently with the Final Rule on March 1, 2013, would amend existing regulations regarding triggering events and special enrollment periods for qualified employees and their dependents and would implement a transitional policy regarding employees' choice of QHPs in the SHOP.

Special Enrollment & Triggering Events. The Proposed Rule aligns SHOP special enrollment provisions to those in the broader group health insurance market. Under the existing regulations, in most instances, a special enrollment period is 60 days from the date of a triggering event. The Proposed Rule amends the special enrollment period for the SHOP to 30 days for most applicable triggering events. This is consistent with the length of special enrollment periods in group markets provided by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which lasts for 30 days after loss of eligibility for 2 other private insurance coverage or after a person becomes a dependent through marriage, birth, adoption or placement for adoption. The Proposed Rule also establishes as a triggering event circumstances where an employee or dependent becomes eligible for premium assistance under Medicaid or the Children's Health Insurance Premium (CHIP), or loses eligibility under either of these programs. For this triggering event, however, the Proposed Rule sets forth a 60-day special enrollment period.

Transitional Policy. As discussed above, a SHOP must allow employers the option to offer employees all QHPs at a level of coverage chosen by the employer. A SHOP may also allow employers to offer one or more QHPs to qualified employees by other methods. The Proposed Rule sets forth a new transitional policy with respect to employees' choice of QHPs in order to provide additional time to prepare for the employee choice model and to increase stability of the small-group market while providing small groups with the benefits of SHOP in 2014.

Under the Proposed Rule, for plan years beginning on or after January 1, 2014, and before January 1, 2015, a SHOP would have the option to, but is not be required to, permit qualified employers to offer their qualified employees a choice of QHPs at a single level of coverage. For plan years beginning during that same period, federally facilitated SHOPs (FF-SHOPs) would assist employers in choosing a single QHP to offer their qualified employees. However, for plan years starting on or after January 1, 2015, both SHOPs and FF-SHOPs must allow employers the option of offering the employee choice model.

According to the New York Times article, "Small Firmsʼ Offer of Plan Choices Under Health Law Delayed," Obama Administration officials said earlier this week that they would be delaying the employee choice model in the 33 states where the federal government will be running the SHOPs. In those states, employers will be limited to offering their employees a single insurance plan.

An Early Glimpse at Employee Reaction

A recent Wall Street Journal article entitled "To Save, Workers Take On Health-Cost Risk" provides a glimpse of employee reaction to similar employer-centric marketplaces known as private exchanges. These private exchanges operate on a similar principle as SHOP, allowing people to shop for health coverage in an online marketplace. In analyzing two large employers that embarked on this new approach to employee health benefits, the results indicated that many employees were willing to choose lower-priced plans that required them to pay more out of their pocket for health care. Moreover, early survey results show that employees were generally pleased with the setup of these exchanges.

Previously published on BizTimes.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Tracey L. Klein
Nicole S. Rosen
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions