Proposed Tweaks to SHOP Exchanges Leave Small-Business Groups Wanting More

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Kristen Ricaurte Knebel

Dec. 8 — Recent proposed rules on the health-care marketplaces for small businesses under the Affordable Care Act might aim to streamline the Small Business Health Options Program but industry groups think the Obama administration needs to focus more on the program to make it a viable option for employers.

The proposed rules tinker “around the margins on a lot of the SHOP parameters, but I really truly feel like they avoid many of the major obstacles that already exist with the SHOP,” said Kevin Kuhlman, manager of federal public policy for the National Federation of Independent Business.

David Chase, national health-care policy director at the Small Business Majority, said while the rules will help employers hoping to send their employees to the SHOPs, he wishes those overseeing the exchanges “would focus a little bit more on the SHOP exchange because we think it’s really suffering from that lack of attention.”

On Nov. 21, the Centers for Medicare & Medicaid Services released proposed rules (CMS-9944-P) on the notice of benefit and payment parameters, folding into it provisions aimed at streamlining administration of the SHOPs, which is for businesses with the equivalent of 50 or fewer full-time employees.

Minimum Participation Rates

The proposed rules aim to modify the calculation of SHOP minimum participation rates, something that Kuhlman called a barrier to small employers being able to offer health coverage to their employees.

Under the proposal, SHOPs choosing to impose a minimum participation rate must include employees covered by other group health plans, governmental coverage including Medicare and coverage obtained on the individual market in their calculation.

Kuhlman said since the statute doesn't require that SHOPs impose a minimum participation rate, CMS missed an opportunity to remove a hurdle to coverage by scrapping minimum participation rates altogether.

“A small business may go to an insurer and that insurer says, no you can’t get 70 percent of your employees to participate, so we can’t offer a plan to you. Well that employer is trying to ‘do the right thing,' and they’re not able to do so. So this could be an opportunity to go around that; instead it just piles on top of it,” Kuhlman said.

Chase expressed a little different opinion about the change, saying it will make it easier for employers to meet the standard.

“We have a few instances where employers want to offer coverage, but 70 percent don’t sign up. We appreciate the added flexibility there,” he said.

Low Participation Rates

While some of the changes included in the rule may encourage some employers to go to the SHOPs, Chase said he isn't sure the modifications are big enough to get small employers to flock to the programs. The Government Accountability Office has said that small businesses' participation in the exchanges are “significantly lower than expected.”

According to a GAO report issued Nov. 13, the 18 state-based SHOP marketplaces (SB-SHOPs) had enrolled about 76,000 individuals, including employees, their spouses and dependent children, in plans purchased through nearly 12,000 small employers as of June 1. The lower-than-expected enrollment can be attributed to the unavailability of many SHOP features, including “online enrollment and employee choice, the ability for employees to choose among multiple plans,” which were delayed for all federally-facilitated exchanges, the report said.

Kuhlman said that the SHOPs haven't been able to attract many small employers and these rules certainly haven't tipped the scales in any meaningful way.

“We always encourage small-business owners to explore all of their options,” he said. “I sense that the only people who will really investigate the SHOPs are those that qualify for the temporary and targeted tax credit. And once that goes away, what happens then I’m not sure.”

Greater Focus Required

Both Kuhlman and Chase said the SHOPs suffer from a dearth of attention from the Obama administration, something that is sorely evident in the proposed rules.

“It would be nice if they focused a little bit more on the SHOP exchange instead of including it in this massive notice of payment parameter regulation,” Kuhlman said. “It would send a message to small-business owners if the administration made SHOP more of a priority than just a sliver within this massive insurance market regulation.”

While Chase said he's not sure if small employers have a specific rule on SHOPs they're looking for, it would be nice if the program seemed like more of a priority.

“It’s kind of just a general more of a commitment to focus on SHOPs. The SHOP exchange really has just kind of been ignored. They’ve had no problem delaying features here and there, delaying the website. It hasn’t been the top priority by any stretch. It’s really been neglected, and that’s the one of the reasons that you’re seeing such low enrollment numbers,” Chase said.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Phil Kushin at


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