Standards for Employer Participation in a SHOP (Small Business Health Options Program)
Proposed rules issued by the U.S. Department of Health and Human Services (HHS) outline the basic standards employers must meet to voluntarily participate in a SHOP. The Affordable Care Act directs each state that operates an Exchange to provide for the establishment of a SHOP to assist qualified employers and facilitate the enrollment of certain employees into qualified health plans.
- Under the proposed rules, a small employer (less than 100 employees) is generally eligible to purchase coverage through a SHOP if the employer elects to offer, at a minimum, all full-time employees coverage in a qualified health plan through the SHOP.
- The standards proposed for small employer participation in a SHOP include requirements that employers provide certain information – both to employees about the methods for selecting and enrolling in a qualified health plan, and to the SHOP about employee eligibility to purchase coverage – as well as rules regarding when an employer must permit employees to seek enrollment in a qualified health plan and when the employer may change its employee offerings for a plan year.
The Health Insurance Premium Tax Credit
The Internal Revenue Service (IRS) issued proposed regulations relating to the health insurance premium tax credit, which is designed to reduce certain individuals’ out-of-pocket premium costs for enrolling in qualified health plans through Affordable Insurance Exchanges.
The proposed regulations provide that a taxpayer is generally eligible for the credit for a taxable year if:
- The taxpayer’s household income for the year is between 100% and 400% of the federal poverty level ($22,350–$89,400 for a family of four in 2011);
- The taxpayer or a member of the taxpayer’s family is enrolled in one or more qualified health plans through an Affordable Insurance Exchange; and
- The taxpayer or a member of the taxpayer’s family is not eligible for other qualifying coverage, such as Medicare, Medicaid, or affordable employer-sponsored coverage.
Proposed Affordability Safe Harbor for Employers
Beginning in 2014, employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees may be required to make a “shared responsibility payment” if any of the employer’s full-time employees obtains coverage through an Exchange and receives a premium tax credit.
To assist employers in determining whether the coverage they are offering is affordable to certain employees, the Treasury Department and IRS are requesting public comment on a proposed safe harbor permitting employers that offer coverage to their employees to measure the affordability of that coverage by using wages that the employer paid to an employee as reported on Form W-2 (instead of the employee’s household income, which is generally unknown to the employer). This safe harbor would only apply for purposes of the employer shared responsibility payment, and would not affect employees’ eligibility for health insurance premium tax credits.
To read more about these proposed rules and other employer responsibilities under the Affordable Care Act, please visit our section on Health Care Reform.