Note: This is from ADP’s Eye on Washington Series, which focuses on legislative changes and clarifications per the Affordable Care Act. Click here to check out the Eye on Washington Series, and register to receive the newsletter: www.adp.com/regulatorynews.
Disclosure: I work for ADP. This information is purely educational, and based on Gov’t Regulation.
Eye On Washington: Health Care Reform
Updated: April 9, 2013
Affordable Care Act (ACA) Update: HHS “Partially” Delays Implementation of SHOP Exchanges
On March 11, 2013, the U.S. Department of Health and Human Services (HHS) issued a proposed rule that delays a portion of the Small Business Health Options Program, also known as the SHOP Exchange. Under the Affordable Care Act (ACA), states are required to establish health insurance Exchanges by January 1, 2014 to assist both individuals and small employers with purchasing health insurance. States have the option of establishing their own health insurance Exchange, partnering with the federal government to run an Exchange, or opting out. If a state declines to establish an Exchange, the ACA requires the federal government to run the Exchange for the residents of that state.
According to the Henry J. Kaiser Family Foundation, as of April 1, 2013, a total of 26 states have indicated that they will not establish a state Exchange or a joint state-federal “partnership” Exchange, and will default to the federal Exchange. HHS’s proposed rule delays until 2015 the ability of a small employer that purchases insurance coverage through the federal SHOP Exchange to choose multiple health plans to offer its employees (the so-called “employee choice model”). Until 2015, the federal SHOP Exchange will, instead, assist small employers in choosing a single qualified health plan to offer their employees. (For these purposes, a “small employer” is defined as an employer that employed, on average, 100 or fewer employees on business days during the prior calendar year. Until 2016, states may reduce the 100 employee limit to 50 employees.)
State-operated SHOP Exchanges may, but are not required to, apply the same restrictions. This proposed rule is intended to provide the government with additional time to prepare for an employee choice model. It is important to note that the delay of the employee choice model in the federal SHOP Exchange does not delay application of the ACA’s Employer Shared Responsibility provisions, which are generally effective January 1, 2014. It also does not delay the requirement that a small employer obtain coverage through the SHOP Exchange in order to be eligible to receive the small business healthcare tax credit for taxable years beginning on or after January 1, 2014.
No action is required by small employers at this time – they will still be able to participate in a SHOP Exchange in 2014. However, employers that purchase health insurance through the federal SHOP Exchange will be limited to choosing one qualified health plan for their employees until 2015. The federal government expects that small employers will have the ability to choose multiple qualified health plans through the federal SHOP Exchange beginning in 2015.