HEALTH INSURANCE OPTIONS : SHOP , DROP OR SELF-INSURE ?
Evaluating Your Business ’ s Health Insurance Options
You may recall the popular saying , “ Stop , Drop and Roll .” This is what we were taught in case a piece of our clothing or hair caught on fire . This same clever saying can ( in a roundabout way ) be applied to the list of options that businesses now have because of Obamacare .
SHOP , Drop , Roll or Self - Insure
There are a number of options that you should consider to help lower the potential danger that health care reform may pose to your business ’ s bottom line . These are the four options – SHOP , drop , roll or self-insure – that every business should contemplate . If you decide just one of them is best and ignore the others , you might be missing out on the best option for your business .
Before we move on , let ’ s define a “ small employer ” and a “ large employer .” According to the Affordable Care Act ( Obamacare ), a small employer is one that employs less than 50 full-time employees . A large employer is one that employs 50 or more employees . With these definitions in mind , let ’ s take a look at what options are available for your business .
SHOP - Small Business Health Options Program
If you ’ re an Ohio small business with fewer than 50 employees , the Small Business Health Options Program ( SHOP ) might be an option for you . This is the business portal to the insurance exchanges . This exchange :
1 . Allows you to get out of higher risk small insurance pools 2 . Enables you to give out pre-tax payroll deductions to your employees
3 . Allows employers to set the contribution dial from 0 percent to 100 percent
Businesses that meet certain goals also may be entitled to a tax credit . No federal premium subsidies are available for SHOP participants ( employees ). In a few years , companies with less than 100 employees will be allowed to use this option in Ohio . SHOP is best for businesses that have high group costs and employees who are not eligible for subsidies .
Drop ... Health Insurance Coverage
You also have the choice to drop employee coverage and allow your employees to go to the insurance exchange . If you drop coverage and employ 50 or more employees , you will be subject to a shared responsibility penalty – but that shouldn ’ t stop you from considering this option . Employees must use after-tax dollars to buy insurance through the exchange . However , premium subsidies are allowed . It ’ s possible for you and your employees to financially come out ahead , even with after tax dollars and paying the shared responsibility penalty . You can also drive wage increases to employees who would be harmed by the dropping of coverage so long as you follow certain guidelines . This option is typically best for companies that have a majority of employees who would get premium subsidies .
Roll ... With Private Insurance Coverage
If you ’ re ineligible for the SHOP and dropping health care coverage isn ’ t a cost-effective option , continuing with your private insurance coverage could be best for you . You may realize cost savings if the plan quality is diminished or if the premium share amount is shifted between your employees and you . Large employers should fully understand their compliance with the “ pay or play ” mandate before adjusting the dial on coverage quality or cost share to avoid penalties . The “ roll ” option is probably most useful for employers who want to spend a little more time deciding what to do or to see how the markets react and how the exchanges work .
Self - Insure
You can go all in with self-insuring your employees for health insurance or take a more moderate approach . The classic “ full ” self-insure option is to assume all the risk an insurance company typically assumes up to a certain level , where a stop-loss policy will take over . There are several new fees and reporting requirements that you are responsible for with this option . ( You will basically function like an insurance company and you ’ ll have to start abiding by the restrictions and rules that typically guide these companies ).
The other option is to obtain insurance as normal (“ roll ”) and set the deductible amount to the highest amount possible – this keeps the premium down . Then you pair that with an employer provided “ self-insured ” product , like an HRA , that will reimburse employee deductibles after a certain level is reached . You are effectively self-insuring for the portion of the deductible above the threshold you set and below the actual insurance deductible . If people don ’ t use a lot of that portion of the deductible , then you ’ ve achieved a lower overall cost for all involved . This also gives you less exposure and greater control over the level of risk you are willing to take on in return for being able to offer lower premiums . Think of it as self-insure light !
Obamacare & Health Insurance Help
Not sure which option is for you or where to start to determine what is best for your business ? Contact Rea & Associates . Our team of Affordable Care Act ( ACA ) experts can help you evaluate all of the options available to you and ultimately help you decide how to proceed .
by : Brian Kempf
CPA , Principal
by : Joe Popp
JD , LLM , Leader of ACA Compliance and Consulting
212 N . Washington St . Millersburg , OH 44654 Brian ( 330 ) 521-4549 brian . kempf @ reacpa . com Joe ( 614 ) 923-6577 joseph . popp @ reacpa . com