Affordable Health Insurance Exchanges are a major component of health care reform. Beginning in 2014, each state must offer individuals the opportunity to purchase health coverage through a state-established Exchange. An Exchange is an insurance marketplace intended to help individuals and small businesses access affordable and quality health insurance. States across the country are working to implement the health insurance Exchange requirements. Toward that end, states can apply for Exchange grants through the end of 2014.
The state-based Exchanges will be designed to make buying health coverage easier and more affordable for consumers. They are intended to allow individuals and small businesses to compare health plans, get answers to questions, find out if they are eligible for tax credits for private insurance or health programs like the Children’s Health Insurance Program (CHIP), and enroll in a health plan that meets their needs.
While Exchanges are generally aimed at providing health coverage in the individual health care market, small employers will also have an opportunity to purchase health coverage for their employees through an Exchange. This coverage for small employers is referred to as the Small Business Health Options Program, or “SHOP.”
For small employers, the Exchange is intended to allow small businesses the opportunity to offer their employees a more diversified choice of plans and insurers at a lower cost, akin to the way larger employers offer benefits. According to www.healthcare.gov, on average, small businesses pay about 18% more than large businesses for the same health insurance policy. The SHOP is intended to level the purchasing power playing field among employers of all sizes.
A SHOP Exchange may take different structures. One approach would be for the small employer to allow individual workers to choose among the various health plans offered by the Exchange. In this model, the employer would pick the level of coverage the employer wants to contribute toward, and the employee would select the health plan in which the employee wishes to enroll. Another approach would be for the employer to select only one health plan offered in the SHOP Exchange to make available to all employees. How employer involvement in SHOP will actually work will largely depend upon how the state's SHOP exchange is structured.
Participation in a SHOP Exchange is initially limited to small employers with 50 or fewer employees (in some cases, 100 or fewer employees). Participation limits gradually increase until 2017 when states have the option to allow businesses with more than 100 employees to participate in the SHOP.
The SHOP will collect premiums, handle enrollment and plan payment, and administer health coverage for the small employer.
States have leeway for creating their Exchanges, including their SHOP exchanges, so employers should pay attention as details unfold.
