As health care reform mandates take effect in 2014, small employers with fewer than 50 full time employees face more changes than large and medium-sized businesses. Several provisions in the new law means small businesses must not only make critical decisions regarding the health care benefits they offer to employees, but ensure they take appropriate implementation actions and adequate communications. Which leads me to the SHOP Exchange.
Understanding the SHOP Exchange
A SHOP exchange is a Web portal where small businesses with up to 50 employees can shop for and buy private health insurance for their employees. Eligible employers that pursue this platform are required to offer SHOP insurance coverage to all full-time employees.
Starting in 2015, SHOP exchanges will provide a premium aggregation service and will send a single invoice to the employer. These exchanges will offer two models:
- Employer-Choice (available in 2014): The employer selects the plans, and employees can then choose from the employer’s selected options.
- Employee-Choice (delayed until 2015): The employer selects an actuarial value level and employees can select from any available plans at the employer’s selected coverage level (60, 70, 80 or 90 percent coverage) on the SHOP exchange.
More Competitive and Cost-Effective Benefit Programs
SHOP Exchanges are expected to offer small businesses more competitive benefit plan options, similar to those that large company group plans provide – giving small businesses the advantage of larger group purchasing power.
Additionally, small businesses participating in a SHOP exchange may be eligible for a tax credit up to 50 percent of their premium payments if they have 25 or fewer full-time employees whose average annual wages do not exceed $50,000. Tax-exempt organizations are eligible for a tax credit up to 35 percent.
While it is still too early to tell exactly how competitive the exchanges will be, tax credits coupled with group rates in the exchanges may help small businesses to provide more cost-effective workplace benefits. [i]
Educating Your Employees
According to the 2013 Aflac WorkForces Report (AWR), 75 percent of employees expect their employer to educate them about changes to their health insurance as a result of health care reform. Shockingly, only 13 percent of employers identified this education as a priority in their organization. [ii]
By not communicating about health care reform, employers are losing their employees’ trust in their ability to keep them protected and informed, as well as their loyalty to the company. Unlike other office perks, health benefits help workers to feel secure about their financial future and their ability to cope with unexpected illness or injury.
Exchanges can help small businesses offer benefits to stay competitive and keep top talent – so it’s best that employees know it.
[i] The Internal Revenue Service (2012) Small Business Health Care Tax Credit for Small Employers, accessed October 3, 2012.
[ii] 2013 Aflac WorkForces Report, a study conducted by Research Now on behalf of Aflac, January 4–24 2013.
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