Q. I’ve heard a lot about health insurance exchanges, but what are SHOP exchanges?
A. SHOP stands for “Small Business Health Options.” It’s the small-business section of the exchange, where small employers can purchase coverage for their employees. In most states that use Healthcare.gov, the SHOP exchange is also run by Healthcare.gov, although Mississippi and Utah use the federally-run exchange for individuals, but run their own SHOP exchanges. The states that have fully state-run exchanges also run their own SHOP exchanges.
Although SHOP is for businesses looking for coverage for employees and the individual exchange is for people who purchase their own health insurance, both are part of “the exchange” in your state, and both were established under the Affordable Care Act.
Small-business premium tax credits for eligible employers are only available on plans purchased through the SHOP exchange.
The SHOP exchange is also a platform that allows a small employer to offer multiple plan selections for its employees, with the simplicity of paying just one bill each month. That feature, dubbed “employee choice” was originally going to be part of the SHOP exchange from the get-go, in 2014. Ultimately, it was delayed twice, and won’t take effect nationwide until 2016. But several state-based exchanges debuted employee choice in 2014, and 14 states in the federally-run exchange opted to begin offering employee choice in 2015.
Employee choice is only as strong as the level of carrier participation however. In Minnesota, there will only be one carrier offering small group plans through MNsure in 2016, so employees wouldn’t be able to choose from among multiple carriers. The same problem existed in Washington state in 2014, despite the state’s willingness to offer employee choice early on. But in states with robust SHOP exchanges, the employee choice features allows small businesses to offer the sort of coverage variety that has traditionally only been available in the large-group market.
Under the ACA, the definition of “small group” was going to include businesses with up to 100 employees starting in 2016 (prior to that, it was businesses with up to 50 employees). But in October 2015, President Obama signed HR1624, which eliminated that definition change. States are free to change the definition, but most have not opted to do so. The SHOP exchange is only available for small businesses, but nationwide that was supposed to include businesses with up to 100 employees starting in January 2016. With HR1624, SHOP exchange coverage will only be available to businesses with 51 – 100 employees if their state opts to change the definition of small group to include businesses with up to 100 employees.