Q. Can small businesses use the ACA’s health insurance marketplaces (exchanges)?
A. The Affordable Care Act created an enrollment platform called SHOP (Small Business Health Options Program), an exchange where businesses could compare plans and enroll in coverage for their employees. Originally, the SHOP exchange was an option in every state, but in the 39 states that use HealthCare.gov, the availability of small-business plans in the exchange changed in 2018. And even among the states that run their own exchanges, some are no longer offering SHOP coverage due to lack of insurer participation.
Instead of having small businesses use the exchange to enroll in coverage, HealthCare.gov now directs them to seek out a broker or contact an insurance company directly. And although the site still maintains a tool where employers can check to see if there are SHOP plans available in their area (for purchase directly from an insurer or with the help of a broker), the tool no longer shows any available plans.
SHOP enrollment lagged from the start
The Small Business Health Options Program (SHOP) never really took off. As of 2017, HHS reported that there were fewer than 39,000 people enrolled in SHOP coverage across the 26 states with fully federally-run SHOP platforms. Hawaii was the first state to obtain approval for a 1332 waiver, and its purpose was to eliminate the state’s SHOP exchange as of 2017.
Arkansas, Mississippi, and Utah used to run their own SHOP platforms (although all three states used HealthCare.gov for individual market enrollments), but had switched to the federal SHOP platform or a direct-to-carrier process by 2019. Arkansas noted that they would no longer have a SHOP option because insurers were no longer participating in SHOP in Arkansas.
And the lack of insurer participation in SHOP has not been limited to states that use the federally-run exchange. The same thing happened in Washington state as of 2018. And Minnesota, which has a functional state-run exchange for individuals, has discontinued its SHOP platform.
Individual market QHP issuers were allowed to stop offering SHOP plans in 2018
The decline in SHOP participation was due in part to lackluster enrollment in the early years, and also to a rule change that HHS finalized in late 2016. Under the new rule (which took effect for plan years starting in January 2018), insurers that offer individual market coverage through HealthCare.gov are no longer required to offer SHOP coverage, even if they (or an affiliate) have more than 20 percent of the small-group market share in the state.
Prior to 2018, those insurers were required to offer at least one silver and one gold SHOP plan in order to be allowed to offer individual market coverage in the exchange. But HHS eliminated that requirement for plan years starting in 2018 or later.
Some state-run exchanges have fairly robust SHOPs
Although SHOP participation and enrollment was underwhelming in most states, enrollment in SHOP coverage in some of the state-run exchanges has been fairly brisk (although in most cases, far lower than enrollment in individual market plans).
Covered California’s SHOP exchange had 47,000 members as of 2018. And DC’s SHOP exchange had more than 77,000 members as of 2018, although that’s driven in large part by the fact that all small-group plans in DC must be purchased through the exchange, and members of Congress also obtain their coverage through the DC SHOP exchange.
Small-business healthcare tax credit
If your business qualifies for a small-business health care tax credit, the credits are only available for plans purchased through the SHOP marketplace. But again, even the tax credit was not a significant draw when SHOP plans were available via HealthCare.gov, as very few small businesses used the platform. (The tax credit is only available for up to two years, so a small business cannot count on it for long-term support.)
‘Small-business’ = up to 50 employees in most states
The SHOP marketplaces were originally open to businesses with up to 50 employees, but that was scheduled to change in 2016, with availability being extended to groups with up to 100 employees. However, the PACE Act, which was signed into law in October 2015, kept the definition of “small-group” at 50 or fewer employees.
But there are four states that changed their laws to match the original intent of the ACA. So SHOP marketplaces in Vermont, New York, Colorado, and California are open to businesses with up to 100 employees. All four of those states run their own exchange platforms; they do not use HealthCare.gov.
Year-round enrollment for small businesses
Although small businesses in most states now enroll directly through insurers (which is what most small businesses did all along), nothing has changed about eligibility for coverage. Enrollment in small-business health plans can be done throughout the year (unlike individual health insurance, which is only available during open enrollment or following a qualifying event).
And for groups that aren’t able to meet the participation requirements and/or employer premium contribution requirements, there’s an open enrollment period each fall (November 15 to December 15) when coverage is guaranteed issue regardless of employee participation and/or employer contributions.
States that still have SHOP platforms
The following states still have SHOP platforms for small businesses. (Some use a direct-to-carrier enrollment approach, while others still offer a full-service enrollment platform.)
- Colorado (only one medical and one dental insurer offer plans as of 2018)
- District of Columbia
- New Mexico (uses HealthCare.gov for individual enrollments, but has its own SHOP platform)
- New York
- Rhode Island
- Vermont (Vermont has always used a direct-to-carrier approach, but all small-group plans in Vermont are SHOP plans, as the state does not allow any off-exchange plans to be sold in the individual or small-group markets).
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.