Readying for Obamacare's Small Business Exchanges
When the federal government announced on September 26 that the opening of the Small Business Health Options Program -- the health insurance exchange for companies with fewer than 50 full-time employees -- would be delayed by a month, until November 1, it seemed like yet another headache for companies trying to figure out a benefits strategy for 2014. SHOP promised to offer small employers a low-hassle way to provide health benefits. But the delay leaves precious little time for companies to explore their options on the exchange, pick their plans and educate employees about their health benefits before they kick in on January 1.
So should you ditch SHOP for 2014 and look elsewhere for health coverage? Benefits advisors say that it may be tempting to abandon the problem-ridden exchange, but whether or not it's wise to do so depends on your company's unique circumstances. "Businesses should really throw open their minds, and reconsider why they offer insurance to employees or why they don't," says Eric Pochas, director of client services at Vantagen, an affiliate of Philadelphia-based accounting firm ParenteBeard. The SHOP delay "provides a new opportunity to revisit" their options, he adds.
If you already offer insurance. Those in this group might be better off sticking with their current plan rather than switching to the exchange, at least for 2014. The choices on SHOP won't be all that plentiful in the first year anyway, because after employers pick their tier of coverage, they'll only be able to offer one plan within that tier to employees. Your choices will increase substantially next year.
Besides, you may get a good deal on your current plan if you renew it early, especially if you employ a predominantly young workforce. "Early renewals give companies a short-term buffer against the reweighting of premiums," says Anthony Fioretti, chief benefits officer in the Milwaukee office of benefits advisory firm HNI. That's because starting in January, the so-called "age rating" provision in the Affordable Care Act will limit the degree to which insurers can discount premiums for young adults, who typically utilize fewer health services than older workers do.
If you will be offering insurance for the first time in 2014. If you're counting on SHOP as an option, you should consider exploring your choices on the private market instead. Several national and local carriers have expanded their menu of plans for small companies. You might also consider self-funding your health plan, an option that's now offered to small companies by a variety of carriers, including UnitedHealthcare.
That's not to say SHOP is a bad fit for every company. Some companies that offer health insurance will be eligible for tax credits in 2014 -- but only if they buy on the exchange. "The healthcare tax credit can be substantial to small employers," says Kathi Wright, a principal at law firm Gray Plant Mooty in Minneapolis. It's relatively simple to do the math, she says: If you have fewer than 25 full-time employees and your average wages are less than $50,000, you can get a tax credit of worth 50 percent of portion of the premiums the company pays.
What's more, some companies may actually benefit by waiting until November to sign up on the federal exchange. For example, SHOP normally requires that 70 percent of your employees participate in whatever plan you buy there. But if you sign up between November 15 and December 15, that requirement will be waived.
If you have your heart set on SHOP but are still nervous about the delay. You should try signing up on paper by calling the exchange and having everything sent by snail mail. If you work with an insurance broker, he or she might also be able to act as an intermediary to get your company signed up on the exchange.
If the delay is creating too much uncertainty for your tastes. Consider 2014 as a time to shop around on SHOP, but not to buy. "Take a wait-and-see approach," Pochas says. "It's the first year of trying to make this monumental new system move. Revisit it next year, especially because there will be more choice available."