SHOP Exchanges for Small Businesses Delayed One Year

Last Friday (March 8, 2013) the Obama Administration announced a proposed rule to delay the implementation of federally facilitated and partnership SHOP exchanges for one year.  The reasons cited for the delay are to address concerns about…

“…whether issuers could meet the deadlines for submission of small group market [qualified health plans] given the new small group market rating rules; whether issuers could complete enrollment and accounting system changes required to interact with the SHOP enrollment and premium aggregation systems required by employee choice; and whether there would be adequate time to educate employers, employees and brokers about the employer and employee choices available in the SHOP.”

What are SHOP Exchanges?

SHOP stands for Small Business Health Options Program.  SHOP exchanges are government run marketplaces that will offer a variety of health insurance coverage options (from private insurance carriers) to small businesses.  The two primary goals of SHOP exchanges are to:

  1. Reduce health insurance premiums for small businesses which typically see higher premiums and renewal increases than large employers
  2. Provide a wide range of benefit options for small business employees

SHOP Exchanges Will Not Aggregate Premiums for Small Employers

Last Friday’s proposed regulations also stated that federally facilitated and partnership exchanges will not aggregate premiums for employers.  Without aggregating premiums, employers may face significantly more administrative burdens if they choose to offer benefits through a SHOP exchange.  Assuming that this proposed rule becomes final, it is likely to have a significant impact on the success of the SHOP exchanges – especially given that many private exchange options are (or soon will be) available to small employers.

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