402 Small Business Health Options Program (SHOP) Marketplaces

Transcription

1 Checkpoint Contents Federal Library Federal Editorial Materials PPC's Tax and Financial Planning Library Health Care Reform (PPC) Chapter 4 Health Insurance Marketplaces 402 Small Business Health Options Program (SHOP) Marketplaces 402 Small Business Health Options Program (SHOP) Marketplaces In addition to having an insurance marketplace that aids individuals in enrolling in health coverage, each state must operate a small business health options program (SHOP) marketplace that provides assistance to qualified employers (see paragraph ) so their employees can purchase insurance coverage through the marketplace [HHS Reg. 45 CFR (a)] Note: A state may have a federally facilitated marketplace for individuals and a state-based SHOP [HHS Prop. Reg. 45 CFR (a)]. However, if a state has a state-based individual marketplace, its SHOP must also be state-based Observation: For tax years beginning after 2013, the small employer health insurance credit will only be available to employers that purchase health insurance for their employees through a SHOP (see sections 1201 and 1207) SHOPs are designed to reduce the burden and costs of small employers providing health insurance coverage for their employees. Through a SHOP, small employers have choices for plans that have typically only been available to large employers. The SHOP willa. provide small businesses a choice of QHPs to offer to employees; b. require health insurance issuers to give detailed information about pricing, benefits, and the quality of their QHPs in a format that makes it easier for the employer and employee to make comparisons among various plans; c. post quality and pricing information, along with consumer satisfaction surveys (when available), regarding each plan on the state insurance marketplace website; and d. offer consolidated billing to an employer beginning in 2015, so that the employer can offer more than one plan to its employees without having to contract with multiple insurers. Services Provided by a SHOP Marketplace While most of the services listed in paragraph must also be provided by a SHOP, it is not required to provide certain services that are specific to the individual market, such as determining an individual's enrollment eligibility or issuing exemption certificates for individuals [HHS Reg. 45 CFR

2 (a)]. However, the SHOP must provide additional services, including, but not limited to (HHS Reg. 45 CFR )- a. Determining whether an employer is eligible to participate in the SHOP (see HHS Regs. 45 CFR and 45 CFR ). b. Assisting a qualified employer's employees in enrolling in QHPs and facilitating open enrollment and special enrollment periods for employees. c. Allowing a participating qualified employer to select the coverage that will be available to its employees. Note: For plan years beginning before January 1, 2015, federally facilitated and federal partnership SHOPs will only allow an employer to make available a single QHP (and, if necessary, a stand-alone dental plan) to its employees. For plan years beginning on or after January 1, 2015, an employer will be allowed to either choose a level of coverage (i.e., bronze, silver, gold, or platinum) in which all QHPs within the level are available to employees or choose a single QHP to make available. In state-based SHOPs, for plan years beginning before January 1, 2015, the SHOP can allow an employer to either choose a level of coverage in which all QHPs within the level are available to employees or use another method to select QHPs that will be available. In state-based SHOPs, for plan years beginning on or after January 1, 2015, the SHOP must allow the employer to choose a level of coverage in which all QHPs within the level are available to employees and may allow an employer to use another method to select QHPs. See HHS Reg. 45 CFR (b). Note: Federal partnership SHOPs are considered variations of the federally facilitated marketplaces and, therefore, are subject to the rules for federally facilitated marketplaces. d. Providing each employer with one monthly bill for the employer's share of premiums for its employees purchasing insurance through the SHOP. The employer must be able to pay the SHOP, and the SHOP will forward the applicable payments to each insurer. Note: Employers participating in a SHOP are not required to pay a portion of an employee's premium for coverage purchased through the SHOP (CRS Report dated June 5, 2013). However, if an employer does not pay a portion of employee premiums, the coverage may be unaffordable for one or more employees. Providing unaffordable coverage could subject certain employers to the employer shared responsibility penalty. See section 502 for more information. e. Providing a premium calculator that takes into account the employer's premium contribution. Determining If an Employer Can Participate in a SHOP Generally, to participate in the SHOP, an employer must be a qualified small employer. For this purpose, a small employer is one that employed on average at least one, but not more than 100, employees on business days during the preceding calendar year, and that employs at least one employee on the first day of the group health plan's plan year (HHS Reg. 45 CFR ). The term employer includes any predecessor employer. However, for plan years beginning before January 1, 2016, states can elect to treat employers that employed on average at least one, but not more than 50 employees, during the preceding calendar year as a small employer. All related businesses treated as a

3 single employer under IRC Sec. 414(b), 414(c), 414(m), or 414(o) (e.g., controlled or affiliated service groups) are treated as one employer for these purposes Note: Plans offered in a SHOP are considered group health plans. Employers with at least one employee (who is not an owner; see paragraph ) may be eligible to participate in a SHOP. For ERISA and IRS purposes, generally, an employer that is eligible to offer a group health plan must have at least two employees State-based Marketplaces During 2014 and 2015, when states have the discretion to choose whether the upper limit of small employer size is 50 or 100, employers in state-based marketplaces can use the state's definition of small employer and can rely on the state's method to determine whether an employee is considered a full-time employee. For plan years beginning in 2016 and later, employers in these states must determine the number of employees by using the method set forth in IRC Sec. 4980H(c)(2), which takes into account the full-time equivalent value (FTE value) of all workers who do not work full time (HHS Reg. 45 CFR ). Therefore, beginning in 2016, the same methods for determining applicable large employer status for purposes of the Section 4980H employer responsibility penalty (see section 502) are used to determine if the employer can participate in a SHOP. Additionally, an employee who works on average at least 30 hours a week (or at least 130 hours during a calendar month) is considered a full-time employee Federally Facilitated and Federal Partnership Marketplaces In states that do not establish a state-based marketplace, HHS will set up a federally facilitated marketplace or work with the state to set up a federal partnership marketplace. For plan years beginning in 2014 and 2015, employers in states with federally facilitated and federal partnership marketplaces will determine small employer status based on the state's definition of small employer (i.e., no more than 50 or 100 employees) (Preamble to HHS Reg. 45 CFR ). However, unlike employers in state-based marketplaces (see paragraph 402.8), for plan years beginning on or after January 1, 2014, employers in these states must determine the number of employees by using the method set forth in IRC Sec. 4980H(c)(2), which takes into account the FTE value of all workers who do not work full time (HHS Reg. 45 CFR ). They cannot rely on the state's method to determine status as a full-time employee. Additionally, an employee who works on average at least 30 hours a week (or at least 130 hours during a calendar month) is considered a full-time employee for plan years beginning on or after January 1, Caution: The definition of a small employer for purposes of participating in a SHOP is not consistent with the definition of small employer for purposes of the small employer health insurance credit (see section 1202) and the Section 4980H employer shared responsibility credit (see section 501) Note: See section 503 for a discussion on which employees (and their dependents) must be given the opportunity to enroll in employer-sponsored health insurance coverage for certain employers to avoid a penalty under IRC Sec. 4980H An employer not in existence throughout the preceding calendar year determines whether it is a small employer based on the average number of employees it reasonably expects to employ (or actually

4 employs) on business days in the current calendar year [Affordable Care Act, P.L , Sec. 1304(b)(4)(B)]. For determining if an employer was in existence throughout the preceding calendar year, predecessor employers are included Qualified Small Employer A qualified small employer is a small employer (see paragraph 402.6) that elects, at a minimum, to make all of its full-time employees eligible for one or more QHPs in the state insurance marketplace's small group market through a SHOP (HHS Reg. 45 CFR ). The employer must offer coverage for all of its employees through the SHOP in which the employer's principal business address is located, or offer coverage to each eligible employee through the SHOP serving that employee's primary worksite [HHS Reg. 45 CFR (b)(3)]. While participating in the SHOP, the employer must comply with all applicable SHOP requirements, processes, and timelines [HHS Reg. 45 CFR (a)] Caution: According to the preamble of the HHS regulations, an employer must have at least one common law employee in order to participate in a SHOP. The definition of employee for employee benefit plans (see DOL Reg ) does not include a sole proprietor, 2%-or-more S corporation shareholders, and certain relatives of these individuals. Therefore, a plan that offers coverage only for a sole proprietor, 2%-or-more S corporation shareholder, and certain relatives of those individuals does not qualify as a group health plan that can purchase insurance coverage through a SHOP. Instead, those individuals would be eligible to purchase coverage through the individual marketplace Note: A qualified small employer does not lose its eligibility to participate in a SHOP simply because it increases its number of employees [HHS Reg. 45 CFR (d)]. Therefore, the employer is allowed continued participation in the SHOP until it otherwise fails to be eligible or elects to no longer participate in the SHOP. Example 4-1: Employer with over 100 full-time employees continues to be treated as a small employer. ABC Housekeepers, Inc. employs an average of 30 full-time employees during For 2014, ABC is a small employer. ABC elects to offer its employees health insurance coverage through the state insurance marketplace's SHOP. In 2015, ABC employs 125 full-time employees. ABC can continue to be treated as a small employer in 2015 and later years, as long as it continues to offer its employees insurance through the SHOP and meets the other eligibility criteria for SHOP participation. Variation: In 2016, when ABC still has 125 full-time employees, it obtains group health insurance for its employees outside the SHOP. ABC is no longer considered a small employer since it chose to not use the SHOP. It cannot use the SHOP in 2017 or later years to obtain health insurance coverage for its employees unless its average number of full-time employees drops to a level that would meet the small employer definition.

5 Small employers may find it advantageous to participate in a SHOP. Insurance premiums through the SHOP may be less expensive than through the individual market. For an employer paying all or a portion of the premiums, this could reduce overall costs. It would also be important for employees since their share of the premiums would be less expensive. However, employers should compare the premium rates in the individual and small group markets The health insurance premiums paid by an employee of an employer participating in a SHOP may be paid under a salary reduction plan or through a cafeteria plan [IRC Sec. 125(f)]. Premiums paid through a cafeteria plan can be made on a pre-tax basis. Large Employer for Purposes of a SHOP For purposes of participating in a SHOP, a large employer is one that employed on average at least 101 employees on business days during the preceding calendar year and employs at least one employee on the first day of the group health plan's plan year (HHS Reg. 45 CFR ). The term employer includes any predecessor employer. However, for plan years beginning before January 1, 2016, states can elect to treat employers that employed on average at least 51 employees during the preceding calendar year as a large employer. All related businesses treated as a single employer under IRC Sec. 414(b), (c), (m), or (o) (e.g., controlled groups or affiliated service groups) are treated as one employer for these purposes. An employer not in existence throughout the preceding calendar year determines whether it is a large employer based on the average number of employees it reasonably expects to employ (or actually employs) on business days in the current calendar year [Affordable Care Act, P.L , Sec. 1304(b)(4)(B)] During 2014 and 2015, when states have the discretion to choose whether the upper limit of small employer size is 50 or 100, employers in states that have a state-based marketplace can use the state's definition of large employer and can rely on the state's method to determine whether an employee is considered a full-time employee. For plan years beginning in 2016 and later, employers in these states must determine the number of employees by using the method set forth in IRC Sec. 4980H(c)(2), which takes into account the FTE value of all workers who do not work full time (HHS Reg. 45 CFR ). Therefore, beginning in 2016, the same methods for determining applicable large employer status (see section 502) are used to determine if the employer is a small or large employer for SHOP purposes. Additionally, an employee who works on average at least 30 hours a week (or at least 130 hours during a calendar month) is considered a full-time employee In states that do not have a state-based marketplace, HHS will set up federally facilitated or federal partnership marketplaces. For plan years beginning in 2014 and 2015, employers in these states will determine large employer status based on the state's definition of large employer (i.e., more than 50 or 100 employees). However, unlike employers in state-based marketplaces (see paragraph ), for plan years beginning on or after January 1, 2014, employers in states with federally facilitated or federal partnership marketplaces must determine the number of employees by using the method set forth in IRC Sec. 4980H(c)(2), which takes into account the FTE value of all workers who do not work full time (HHS

6 Reg. 45 CFR ). They cannot rely on the state's method to determine status as a full-time employee. Additionally, an employee who works on average at least 30 hours a week (or at least 130 hours during a calendar month) is considered a full-time employee for plan years beginning on or after January 1, Note: For determining if an employer was in existence throughout the preceding calendar year, predecessor employers are included Note: See section 503 for a discussion on which employees (and their dependents) must be given the opportunity to enroll in employer-sponsored health insurance coverage for certain employers to avoid a penalty under IRC Sec. 4980H Caution: The definition of large employer for purposes of participating in a SHOP is not consistent with the definition of applicable large employer for purposes of the employer shared responsibility penalty under IRC Sec. 4980H. See section 502 for a discussion regarding applicable large employers Generally, large employers will not be allowed to purchase group health insurance through a SHOP. Instead, large employers will purchase health insurance coverage for their employees through the large group market. However, beginning in 2017, each state can allow issuers of health insurance coverage in the large group market of that state to offer QHPs through the SHOP. If a state makes that election, a large employer can be included as a qualified employer that can elect to make all full-time employees (and their dependents) eligible for one or more QHPs offered through the SHOP [HHS Reg. 45 CFR (b)(9)]. Participating in a SHOP Employers that want to provide health insurance coverage for employees and their families through a SHOP must enroll in the program by completing a streamlined application that is available online. To complete the application online, the employer will create an online account. Alternatively, the employer may call a SHOP call center or visit an agent, broker, navigator, non-navigator, or certified application counselor (see the discussion beginning at paragraph ) to complete the application Caution: SHOPs are not required to accept paper applications or applications over the telephone. Therefore, some SHOPs may only accept online applications During the application process, the employer must providea. the employer's name, contact information, and address of each business location; b. the number of full-time employees; c. information about the health plan choice selected, such as the cost-sharing level it wishes to provide (i.e., bronze, silver, gold, or platinum), a specific plan, length of any waiting period (up to 90 days), and the percentage of the premium it will pay towards individual and family coverage in the selected plan; Note: Employers participating in a SHOP are not required to pay a portion of an employee's premium

7 for coverage purchased through the SHOP (CRS Report dated June 5, 2013). However, if an employer does not pay a portion of employee premiums, the coverage may be unaffordable for one or more employees. Providing unaffordable coverage could subject certain employers to the employer shared responsibility penalty. See section 502 for more information. d. a list of the employer's qualified employees and their social security numbers; and e. information to set up payments of the employer's portion of the monthly premiums (e.g., credit card, bank account) Along with the employer's application, an application completed by each employee who would like to enroll in the employer plan must be submitted. The SHOP will review the submitted forms and determine if the employer is eligible for SHOP services and if each employee is eligible to purchase insurance through the SHOP. After reviewing the submitted information, the SHOP will send the small employer the information needed so that a plan can be chosen and employees can complete the enrollment process Note: A copy of the SHOP applications used by federally facilitated and federal partnership marketplaces are in Appendixes 4F and 4G, respectively. State-based marketplaces can develop different applications. Any state-developed applications must be approved by CMS (see CCIIO Memo dated June 18, 2013). Special Enrollment Periods in SHOP Similar to the special enrollment periods that must be provided in the individual market of a state insurance marketplace (see paragraph ), the SHOP must allow special enrollment periods for a qualified employee or dependent of an employer participating in a SHOP when the employee or dependent [HHS Reg. 45 CFR (j)(2)]- a. loses minimum essential coverage; b. gains a dependent or becomes a dependent through marriage, birth, adoption, placement for adoption, or placement in foster care; c. demonstrates that enrollment or nonenrollment was unintentional, inadvertent, or erroneous, or due to an action or inaction on the part of the state marketplace; d. adequately demonstrates that the QHP in which he or she is enrolled violated a material provision of its contract in relation to the enrollee; e. moves and has access to new QHPs; f. demonstrates that he or she meets other exceptional circumstances that according to HHS guidelines allow for special enrollment; or g. becomes eligible or loses eligibility for coverage under a Medicaid or CHIP plan Generally, the employee or dependent has 30 days from the triggering event to select or change coverage under a QHP through the SHOP [HHS Reg. 45 CFR (j)(3)]. However, if the triggering event is becoming eligible or losing eligibility for coverage under a Medicaid or CHIP plan, the individual

8 has 60 days to select new coverage Note: Employees who are Indians (as defined by section 4 of the Indian Health Care Improvement Act) can enroll in a QHP or change from one QHP to another one time per month Thomson Reuters/PPC. All rights reserved Thomson Reuters/Tax & Accounting. All Rights Reserved.