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Insuring employees under the Affordable Care

Act’s Small Business Health Options Program

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O n the outskirts of the fracas surrounding the Affordable Care Act (ACA) and its various mandates on individuals and larger businesses, there remains a group of small-business owners

who are untouched by the law’s mandatory insurance requirements. However, some of these small-business owners may still be interested in insuring themselves and their employees. While it seems these employers may be lost in the folds, the ACA does offer this group the option of purchasing insurance through the law’s voluntary employee insurance platform, the Small Business Health Options Program (SHOP). “The government and the media have been so involved in trying to push the ACA and getting people signed up on exchanges, there hasn’t been a focus on making employers aware of what their options are,” said David Zetter, board member of the National Society of Certified Healthcare Business Consultants, and owner and founder of Zetter Healthcare Management Consultants in Mechanicsburg, Pennsylvania. >>

BY VICTORIA HOUGHTON, ASSISTANT MANAGING EDITOR

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TALKING

Indeed, according to a November 2014 U.S. Government Accountability Office report, enrollment in the SHOP plans has been significantly lower than anticipated — with 2 million potential customers, only 76,000 individuals were enrolled through 12,000 SHOP plans in the 18 state-run exchanges. The 33 federally run SHOP exchanges have yet to release enrollment numbers. (See sidebar on p. X for more on enrollment numbers.) “Most of my clients don’t know about SHOP unless we mention it to them,” Zetter said. As such, while many physicians have been focused on the effects of the law on patient care, they may not have thought about it from the practice management perspective. For physicians whose businesses are not required to purchase group health insurance for their employees, what are their insurance options?

Who is required to purchase employee insurance?Beginning in 2015, employers with 100 or more full-time employees are subject to a fine if they do not provide their employees insurance that covers at least 60 percent of the cost of covered services. In 2016, employers with 50 or more full-time workers will also be penalized for not providing employee insurance. According to the U.S. Chamber of Commerce, “The penalty amount assessed to the employer will vary based on whether the employer fails to offer any health care coverage at all to full-time employees or offers coverage that is not affordable and/or does not provide the minimum value required.”

However, “as an employer, if you have less than 50 full-time employees, you’re not required to provide anything from the mandate point of a view,” said Donald Calvert, vice president of Health and Welfare at employee benefit consulting agency, Cundy Insurance in Fort Lauderdale, Florida. Essentially, “most solo-practice doctors don’t have to offer insurance to their employees.” Indeed, according to the Academy’s 2014 Dermatology Practice Profile Survey, 35 percent of dermatologists are primarily in a solo-practice environment. These physicians may fall into the category of employers who are not required by the ACA to obtain health insurance for their employees. These physician groups, therefore, have the option of enrolling in the SHOP.

What is SHOP and who is eligible to enroll?Like the individual insurance exchange, the SHOP serves as a marketplace for small businesses to purchase insurance for their full-time employees. According to the U.S. Chamber of Commerce, full-time employees are classified as those who work 30 or more hours a week, averaged throughout the course of a month. Yet, unlike the individual marketplace, SHOP is a voluntary program. “SHOP is a platform to purchase insurance on a group basis,” said Sibyl Bogardus, chief compliance officer at insurance brokerage firm Hub International.

SHOP is available in all 50 states and the District of Columbia for small businesses with fewer than 50 full-

time employees, and employers can enroll at any time. In general, to be eligible for SHOP, the majority of a business’s employees must enroll, or prove that they have insurance through their spouse’s employer, Medicaid, Medicare, the VA, or Tricare. However, an employee who has their own insurance cannot be removed from the participation requirement calculation. “A lot of states have a 70 percent participation requirement. Every state is different,” Calvert said. In Arkansas, Iowa, Nevada, New Hampshire, New Jersey, South Dakota, and Texas, at least 75 percent of full-time employees must enroll; in Tennessee 50 percent of employees must enroll. Additionally, depending on the rules issued by each state’s Department of Insurance, some states require the employer to cover dependents. Thirty-three state exchanges are run by the Centers for Medicare and Medicaid (CMS) and 18 are run by the states, but all can be accessed through www.healthcare.gov/small-businesses.

“SHOP provides employers with the ability to offer employees a range of plan options from more than one insurance company,” a CMS spokesperson said. Each marketplace offers four plan levels: bronze, silver, gold, and platinum. These categories vary depending on the premiums, deductibles, and co-payments. In a Bronze category, the health plan pays for 60 percent of the cost of care and the employee pays 40 percent. In a Silver category, the plan covers 70 percent of the costs and the employee covers 30 percent. In a Gold plan, the health plan pays 80 percent and the employee pays 20 percent. In a Platinum category, the health plan pays for 90 percent of the total cost of care and the employee pays 10 percent. The higher the plan, the higher the monthly premiums — which are shared between the employer and employee — and the lower the employees’ out-of-pocket costs will be.

In terms of the specific coverage and benefits offered in the SHOP plans, “It’s going to be something that varies from state to state and program to program,” Bogardus said. Overall, CMS claims that regardless of the differences among the various options available in each state, the SHOP plans all provide comprehensive health coverage. “All health plans sold through SHOP Marketplaces are known as ‘Qualified Health Plans’ and include a package of essential health benefits, like coverage for doctor visits, preventive care, hospitalization, and prescription drugs,” a CMS spokesperson said. Additionally, the employer can choose to add a dental benefit to the group plan.

What are the advantages of SHOP compared

to the private marketplace?When compared to plans purchased outside of the exchange, SHOP offers employers the option of selecting any plan from a variety of insurance companies, and in 14 states employees and the employer can choose their own carrier and plan. Therefore, one employee or the employer can select a platinum plan, and others can select bronze plans. In the private marketplace, “Even when multiple plan offerings

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According to a November 2014 U.S. Government Accountability Office (GAO) report, en-rollment in the SHOP plans has been significantly lower than anticipated. With 2 million potential customers, as of June 2014, only 76,000 individuals enrolled in 12,000 SHOP plans in the 18 state-run exchanges. The 33 federally run SHOP exchanges have yet to release enrollment numbers.

The GAO attributes SHOP’s stunted growth to the lack of a significant incentive to purchase a SHOP plan. “…the two-year limit on the availability of the small busi-ness tax credit and the likelihood, according to stakeholders, that SHOP premiums will not be lower than non-SHOP premiums, may hinder future enrollment growth.” However, the GAO suggests that in time, the SHOP platform could see some growth

if more states offer the option for employees to choose their plans and if there is increased marketing of the SHOP to small businesses. Yet, “the evolving and localized nature of these factors suggests that a determination of the SHOPs’ long-term impact remains premature at this time.” For more information on SHOP, visit www.healthcare.gov/small-businesses/.

SHOP STATS

Weighing the pros and cons of SHOP

ADVANTAGES

Employees can choose their own health plan in certain states

Physician gets one bill for multiple plans/carriers; SHOP disburses the payments

Rates are calculated the same as with non-SHOP plans

Some businesses are eligible for tax credits worth up to 50 percent of pre-mium contributions

DISADVANTAGES

Fewer options to choose from when compared with plans directly purchased from insurance companies

Inadequate networks/provider listings

Requires ERISA compliance and paperwork

Tax credits for only two years. Only applies to businesses with fewer than 25 full-time employees, with average wages of less than $50,000, and employer must cover at least 50 percent of premiums

exist, in most cases employees are limited to choosing from a single insurance company with a single network of doctors, hospitals, and other medical providers,” a CMS spokesperson said. “SHOP provides employers with the ability to offer employees a range of plan options from more than one insurance company.” According to CMS, even if multiple plans from various companies are selected, the employer will receive only one bill. “The SHOP takes it from there and makes separate premium payments to applicable insurance companies.”

In terms of cost, the methodology used to calculate the rates for the SHOP plans are on par with those offered by private insurance companies outside of the SHOP platform. “If you look at a small group health insurance rate — whether you go buy it through the SHOP or from a local independent agent on the street, or a broker, or directly with the insurance carrier — the rates are the rates are the rates,” said Rob DiMase, executive vice president of Sentinel Benefits and Financial Group in Wakefield,

Massachusetts. “SHOP is just another distribution source.” According to DiMase, all insurance rates are based on a few key demographics of the members of the insured group — most notably, age, but also location and whether or not the beneficiary smokes. “They’re looking at the members who will be covered or insured under the policy, but also the employee’s spouses and dependents — up to the first-degree dependents.”

In addition to comparable rates for essential benefits, SHOP boasts that it offers a tax credit for eligible employers. “Employers purchasing coverage through SHOP have access to exclusive tax credits worth up to 50 percent of premium contributions,” a CMS spokesperson said. In terms of eligibility, “You have to have fewer than 25 full-time-equivalent employees, and they have to have average wages of less than $50,000 adjusted for inflation. The employer has to cover at least 50 percent of the premiums,” Bogardus said.

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What are the disadvantages of SHOP compared to

the private marketplace?Tax credits aside, in some areas there may not be as many carrier options on the SHOP platform as there are in the private arena. “One of the problems with the SHOP plan is the limited options of carriers and plans,” Calvert said. “I looked for a SHOP plan for a client in Wyoming. In the individual market there were six companies offering plans, and on the SHOP there were two. There’s just more choice in the non-SHOP environment.”

And while CMS touts a comprehensive array of plans offering essential health benefits, some insurance brokers and consultants are skeptical about the adequacy of the networks provided in each plan. “Most of my clients that are seeing some of these plans are not very pleased with them,” Zetter said. “A lot of them have very narrowed networks. The affordability is there, but you get what you pay for.” Calvert agrees and adds that the plans available on the SHOP are not mirror images of those in the private marketplace because insurance companies are trying to be competitive by offering plans at lower prices, and as a result, end up removing benefits and narrowing provider networks. “The carriers who are offering SHOP benefits are limiting the plans and they are more limited than what they could buy through a small group program,” Calvert said. According to CMS, however, this assessment is premature. “The Marketplaces have been live for less than two years,” said a CMS spokesperson. “So it’s too early to draw conclusions about provider network trends.”

What are compliance and eligibility issues

to watch out for?Physicians looking to offer employee insurance through SHOP should be aware of several not-so-explicit regulations. “The healthcare.gov site gives you guidelines on what employers have to pay, and who qualifies, but it doesn’t give any of the rules,” Calvert said. “All they’re looking at is price.” According to Bogardus, small-business owners should be mindful that SHOP plans are still considered Employee Retirement Income Security Act (ERISA) plans, and are therefore required to adhere to certain procedures regarding informing employees about the plan’s offerings, costs, and regulations. For example, the employer is required to provide their employees with written documentation that explicitly outlines information on the plan’s health benefits and funding, procedures for claims and appeals, and rules regarding the employer’s responsibilities as the plan administrator. Additionally, employers must provide employees with the same federal disclosures as those required with a group health plan that is purchased in the private marketplace, such as notices regarding changes to the health benefits provided, and/or the availability, or lack thereof, of COBRA. (The Consolidated Omnibus Budget Reconciliation Act [COBRA] allows employees who lose their health plans to extend the plan for a specified time period.)

“The employer would need to be aware of that — whether they’re providing coverage through the SHOP or coverage through the traditional group insurance plan outside of the SHOP,” Bogardus said. See the U.S. Department of Labor’s website for more information on ERISA requirements at www.dol.gov/dol/topic/health-plans/erisa.htm.

Paperwork notwithstanding, small businesses also have to be aware of applicable discrimination rules. For example, “Could the physician get themselves an amazing plan separately from the group plan? The answer is yes. They could do that privately because currently there are no discrimination rules for fully insured group health plans.” However, Bogardus recommends keeping an eye out for changes to the law as health care reform evolves. “The health reform law contains a provision that the IRS is supposed to prepare discrimination rules. In the future it could become an issue.”

Additionally, many in the small-business world believe that, given the tight eligibility requirements, the tax credit associated with SHOP participation is not a big enough carrot to make SHOP worth their while. The tax credit is available to employers for only two consecutive taxable years, and while the Internal Revenue Service (IRS) allows the employer to remove their salary from the equation when calculating the business’s average wages, that still might not be enough to lower the average and qualify for the tax credit. “If you’re a pizza shop, bagel shop, gas station, or something along those lines, and you’re looking to get coverage, then perhaps you might qualify for some tax credits as well. That’s kind of a yawner from our perspective,” DiMase said.

Moreover, Bogardus has witnessed a lackluster response to the tax credit even among her clients who do qualify. “We do have some clients that have considered the tax credit and would qualify for it, but have chosen not to pursue it just because they don’t want to have additional government oversight of how their small business is operating,” Bogardus said. “They think it may be just one more form that could be audited. Some people may say that this is a disappointing approach, but some small businesses just don’t view these tax credits as being worth the potential risk.”

What are alternative insurance options? If a small-business owner decides not to utilize SHOP or purchase a group plan from the private marketplace, another possibility is to not provide a health plan and simply rely on the individual mandate for your employees’ insurance needs. However, this option comes with some tricky compliance rules. According to Bogardus, an employer with fewer than 50 full-time employees can tell employees to purchase insurance through the individual marketplace. To help with the costs, they can then offer employees a flat salary raise across the board to use toward their health insurance costs if they so choose. “You simply say, ‘We’re not going to provide benefits. Here is additional taxable compensation to you to do with it what you will. This is a one-time increase and

TALKING

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we’re not going to provide the health plan,’” Bogardus said. “You have to be pretty darn certain that you’re not going to provide a health plan in the future, because you would have to wrestle with whether you do a takeaway and reduce the compensation.”

However, according to Bogardus, an employer cannot offer to reimburse employees for their health insurance, or pay their policy premiums directly. “The IRS considers these to be employer payment or reimbursement arrangements,” Bogardus said. According to Calvert, in Revenue Ruling 61-146 in the Health Care Reform Code there is a $36,000 per year fine for doing this. Overall, when it comes to relying on the individual mandate, “The federal administration does not want the individual exchanges and individual policies to be a fallback for employers that might otherwise offer a group product,” Bogardus said. “They don’t want the individual marketplace to become a dumping ground for expensive employees.”

Should I cover my employees?As small-business owners, opting to not insure employees is certainly an option for those not required to under the ACA. According to data released by the Kaiser Family Foundation in November 2014, of the 36 million Americans working in small businesses with fewer than 50 full-time employees, 50 percent received health care from their employer. “If it’s not a competitive advantage, or if the employees have access to coverage elsewhere, or could possibly use the health exchange for access, or for access plus a federal subsidy, some small employers just don’t see the advantage

of offering benefits,” Bogardus said. “On the other hand, when an employer does have a competitive advantage due to offering health insurance, there are no equally attractive substitutes.”

Regardless of the route an employer takes when exploring insurance options for their employees, Jeff Queen, president of Integrated Dermatology Group, argues that offering health insurance to employees could benefit a small business, particularly from a competitive standpoint. “Intuitively, every physician out there knows this concept, but instinctively it’s hard to grasp, and that’s employee retention,” Queen said. “If you incorporate the cost of having great people at the front desk or a medical assistant, and look at the dollars that are spent to train them — not to mention the opportunity costs to the physicians who have to do that work themselves — it makes a lot of sense,” Queen said.

All told, when it comes to the lesser-known brother of the ACA’s individual insurance marketplace, SHOP, there are some clear advantages and disadvantages for employers and employees alike. Yet, according to a CMS spokesperson, the SHOP platform is young and will continue to evolve. “As SHOP matures as a market, we expect there to be a range of provider networks at varying price points available for consumers.” However, some brokers and consultants are recommending caution as SHOP continues to bake. “I just don’t think the SHOP is a strong platform, but that may change in the future,” Bogardus said. “We may see more interest in it, but for the immediate future, I wouldn’t consider that as the avenue to explore primarily.” dw

Utilize an insurance

broker who can decipher

health plans and rates.

For employers who are interested in providing health insurance for their employees,

but have decided that the plans offered through the SHOP platform just aren’t cutting it,

there is always the option to purchase insurance directly through the private insurance

companies. When going the non-SHOP, private route, experts offer the following advice:

“I just don’t see a single-practice physician having the time to research benefits,” said Donald Calvert, vice president of Health and Welfare at employee benefit consulting agency, Cundy Insurance in Fort Lauderdale, Florida. “Even if they had their front desk person investigate, they don’t have the knowledge.” David Zetter, board member of the National Society of Certified Healthcare Business Consultants, and owner and founder of Zetter Healthcare Management Consul-tants in Mechanicsburg, Pennsylvania agrees. “I bring in a benefits coordinator that handles everything on behalf of my clients and they get paid from the premiums to help manage that process, at no expense to my clients.”

NON-SHOP OPTIONS

Evaluate your

practice to determine

potential pain points.

According to Rob DiMase, executive Vice President of Sentinel Benefits and Financial Group in Wakefield, Massachusetts, the methodology used to calculate health insurance rates in most states is primarily focused on age — the higher the average age of the insured group, the higher the rates. “Unfortunately, given the way the rating factors work, age is a huge driver of costs,” said DiMase. Additionally, “The smaller you are, the bigger the impact. Be cognizant of who in your employer group will ultimately drive the rates.”

Determine an appropriate

budget and select a

plan accordingly.

Zetter has his clients come up with a flat dollar amount in terms of how much they want to pay for employee insurance and Zetter’s team will narrow the options from there. “They come up with a static dollar amount and they can increase it at any point in time across the board, but at least this way — from a budgeting standpoint — every year you know what your contribution is going to be.”