The Small Business Health Options Program (SHOP) has been in place since 2014 and, in essence, it’s designed to assist small businesses in streamlining the process of selecting health insurance plans for all employees eligible for coverage within their organization.
For many small business owners, the new mandates set forth by the Patient Protection and Affordable Care Act (commonly known as the ACA, or Obamacare) have changed the requirements for insuring their employees. These guidelines can be confusing with respect to the conditions set forth for providing coverage and the types of plans that are now available.
SHOP was established to make the process easier by helping identify various plans by cost and coverage specifications, providing access to pertinent tax breaks and other advantages that business owners might be eligible to enjoy, and outlining consumer protections that have been implemented with respect to premium costs for certain employees on the payroll.
Small business owners can use SHOP through an insurance broker or do it all on their own, it’s actually fairly easy to understand with simple coverage comparisons and explanations of policies that fit with any size of budget and employee roster. There are many facets to finding health insurance for small businesses through SHOP and the following are just some of the components that business owners would be wise to consider when they are buying insurance for themselves and their organization.
Applying for SHOP Coverage
Using the Healthcare.gov website, small business owners have been able to apply online for coverage as of November 15th, 2014. Since that time, the number of businesses that qualify for SHOP coverage has increased based upon the amount of full-time equivalent employees (FTE’s) that are currently working for a company.
In 2015, businesses with 50 or fewer FTE’s were allowed to buy coverage through SHOP, but that number has since increased in 2016 to employers with 100 or fewer FTE’s. All fifty states have SHOP marketplaces and the eligibility of an employer to use SHOP in any one state is dependent upon that employer having an office or an employee in the relevant areas of service.
All full-time employees must be covered under the plan and, for the purposes of definition of a full-time employee under SHOP eligibility, that individual must be working for the company for 30 or more hours a week on average. Any employee working less than 30 hours per week is not considered full time and does not qualify under the guidelines.
Most states also mandate that a minimum of 70% of a qualifying small business’ FTE’s must be enrolled in the SHOP exchange. Companies that fail to comply with providing adequate coverage to their full time employees are subject to penalties in the form of a shared responsibility fee, at a cost of $2000 per employee, which can add up fast based upon how many employees have been left continuously without coverage.
The Benefits of SHOP
Small business owners who are buying their coverage with SHOP through an agent, representative, or on their own will find that they are presented with a wealth of coverage options from well-known, high-quality insurance companies. The SHOP marketplace makes it easy to customize the right plan for each small business, offering employers choices in the types of coverage they provide for their workforce.
Business owners have the option of choosing one plan for their employees or offering a variety of options so that their employees can make the decision for themselves. SHOP also sets forth options for employers to provide health coverage, dental, or a combination of both along with a scale of how much they pay for employee premiums. They can even decide on whether or not to cover their employees’ dependents as well.
At the time of the initial introduction of the Healthcare.gov website, consumers complained that it was fraught with problems, but the various bugs and lag times that plagued the site have since been worked out. Now, all of the pertinent information and necessary actions that come with using the SHOP marketplace are easily accessed, with employers able to review the various plans, apply for coverage, manage their policies, and even pay premium costs on the site. The website also lays out the various tax breaks and credits that are being offered to qualifying small businesses.
Self-employed individuals who run their own business and do not have any other employees are ineligible for the SHOP program. Instead, they must apply for coverage through the individual Health Insurance Marketplace instead.
Available Tax Breaks
When signing up for SHOP, small business owners can also find out if they are eligible for tax credits which can save them money on the contributions they make to their employees’ monthly premium costs. Those companies who maintain fewer than 25 FTE’s making an average of $50,000 or less may qualify for the Small Business Health Care Tax Credit, which is only available to employers who offer their workers coverage through SHOP.
These credits fluctuate based upon how many, or more to the point, how few, full time equivalent employees are covered by the business. Employers who pay up to 50% of their FTE’s healthcare premium costs are eligible and the tax credit can cover that cost entirely.
It becomes less with more full time employees on the payroll who are making more money annually. A company with fewer than 10 FTE’s making around $25,000 a year or less can receive up to 50% in tax credits. Those with 11-25 FTE’s making a higher salary on average will qualify for less of a credit, but still substantial enough to be worth applying for, depending on the size and purpose of the small business.
Those employers who want to claim their eligible SHOP tax credits must file form 8941 with their taxes. This form is available online and small business owners can apply to receive tax credits retroactively from 2010 to 2012, if they qualify. There are various other restrictions and requirements that also apply, so these employers will want to visit Healthcare.gov or consult other online resources to see how much of a tax benefit they may be eligible to receive.