What is the SHOP? SHOP stands for Small business Health Options Program, and it was established by health care reform as part of the state run marketplaces used to purchase health insurance plans for businesses with less than 50 employees. The goal of the SHOP is to make it easier for small businesses to purchase a group health plan and to offer tax credits for doing so. But is SHOP best for your employees and their families?
Each SHOP program will be different in the state your business is located, but in California (through Covered CA), SHOP plans have been drafted to offer an employee self-only coverage option. This option means that SHOP plans can allow employers to exclude spouses and dependents on their group plan. This differs from other small group health plans, where employers are required to OFFER the spouses and dependents the opportunity to participate in the group plan, BUT THEY ARE NOT REQUIRED to make any contribution to the spouse or dependents’ insurance.
Why is this significant and important to employees? An employee who has health insurance through the SHOP may still be entitled to subsidies for his or her family members, while an employee who has health insurance through a regular group plan will not be entitled to subsidies for his or her family.
This is because of a portion of the Affordable Care Act that addresses the concepts of Affordable Coverage and Minimum Value Standards. Employees that are offered health insurance at work are not eligible for premium tax credits, if that coverage is affordable to them AND the health coverage provides minimum value. And, not only are employees not eligible for premium tax credits, neither are their families, regardless of whether or not the employer’s health plan is affordable to the family. Calculations of affordability and minimum value are based on the employer’s contribution to the employee’s health insurance only, not spousal or dependent contributions.
This leaves many families in a bind, because employers must offer coverage for an employee’s family to meet minimum value standards, but they do not have to pay for family coverage to meet affordable coverage standards.
The exception is SHOP plans, which can allow employers to exclude dependents from participating in the plan, failing the minimum value standards and thus allowing families not on the employer’s insurance to qualify for premium assistance credit, depending on their family income. This makes the SHOP a very attractive option for certain businesses. Consult an agent that has been certified by the exchange in your state for more advice.