Agencies Issue Proposed Regulations on Employer Participation in Small Business Health Options Program

200px-US-DeptOfHHS-Logo_svg.pngThe U.S. Departments of Health and Human Services (HHS) and the Treasury have issued a proposed rule (pdf) that establishes standards for health exchange eligibility and enrollment in a qualified health plan (QHP) and employer participation in the Small Business Health Options Program (SHOP) as established under the Affordable Care Act. According to an overview of the proposal, its terms complement a proposed rule issued last month related to the establishment and operation of health insurance exchanges under the new health care law. The new proposed rule does not address standards (1) outlining the Exchange process for issuing certificates of exemption from the individual responsibility provision and payment; (2) defining essential health benefits, actuarial value and other benefit design standards; or (3) standards for Exchanges and QHP issuers related to quality. These issues will be implemented in future rulemaking.

As discussed in a health exchange fact sheet, the SHOP – to begin operation in each state in 2014 – is designed to enable small employers to enhance their health insurance purchasing power within the Exchanges. Businesses with up to 100 employees will be eligible to participant in the SHOP, although states can limit participation to businesses with up to 50 employees until 2016. Some employers participating in the SHOP may be eligible for a small business tax credit for up to 50% of the employer’s premium contributions toward employee coverage.

Overall, the proposed rule parallels and cross-references the prior rule on SHOP eligibility issued in July. Among other requirements, the following terms apply:

  • An employer is a qualified employer eligible to purchase coverage through a SHOP if such employer:
    • Is a small employer (fewer than 100 employees);
    • Elects to offer, at a minimum, all full-time employees coverage in a QHP through a SHOP; and
    • Either has its principal business address in the Exchange service area and offers coverage to all its employees through that SHOP, or offers coverage to each eligible employee through the SHOP serving that employee's primary worksite.
  • A qualified employer may participate in multiple SHOPs, but the proposal notes that if an employer has more than 100 employees divided among multiple SHOP service areas, such an employer would be considered a large employer.
  • A qualified employer participating in the SHOP may continue to participate if it ceases to be a small employer solely because of an increase in the number of employees. In such instances, the employer will continue to be treated as a qualified employer and may continue its participation until the employer either fails to meet the other eligibility criteria or elects to no longer participate in the SHOP.
  • A qualified employer participating in the SHOP must disseminate information to its qualified employees about the process to enroll in a QHP through the SHOP.
  • A qualified employer must submit any contribution towards the premiums of any qualified employee according to the standards and processes described in the applicable section of the July proposed rule.

More information on the SHOP program can be found here.

The rule also outlines the eligibility criteria an individual would need to meet in order to participate in the Exchange and be entitled to certain tax credits and cost-sharing reductions that may be available for those whose household income is at least 100% but below 400% of the federal poverty level. The HHS also proposes that the Exchange will notify the employer and identify the employee when the insurance exchange determines that an applicant is eligible to receive advance payments of the premium tax credit or cost-sharing reductions based in part on a finding that his or her employer does not provide minimum essential coverage, the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, or the employer provides coverage that is not affordable. The Act states that a plan would be unaffordable if the employee’s contribution exceeds 9.5 percent (in 2014, and indexed in future years) of household income. The proposed rule clarifies that the definition of “household income” does not include the income of an individual in a primary taxpayer’s family who is not required to file. The proposal notes that “Exchanges will interact with employees and their employers in order to make a determination of eligibility for advance payments of the premium tax credit and cost-sharing reductions.”

In addition, the agency invites comment “on the timing and reporting of information needed to verify whether an employed applicant is eligible for an advance payment of the premium tax credit and cost-sharing reductions and how best for Exchanges to interact and communicate with employers to verify information regarding employer-sponsored coverage.” In developing the standards for Exchange verification of eligibility for qualifying coverage in an eligible employer-sponsored plan, HHS and the Departments of the Treasury and Labor state that “they are working together to coordinate how needed information could be reported in order to make it efficient and easy for employees to access it and to minimize burden on employers.” For example, consideration is being given to whether Exchanges could provide a template that both employers and employees could use to capture information already reported. Specifically, input is sought on the following questions:

  • whether a template would be helpful and, if so, how it could be designed to capture plan-level information that is already reported to employees, the IRS and/or the Department of Labor, and
  • whether the development of a central database is an attractive option for employers to provide information about the coverage offered under eligible employer-sponsored plans.

Comments on this proposal must contain the file code CMS-9974-P and be submitted within 75 days of the proposal’s publication in the Federal Register, which is scheduled for August 17, 2011. Comments may be submitted electronically through the federal eRulemaking portal, or by regular mail to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9974-P, P.O. Box 8010, Baltimore, MD 21244-8010; or by express or overnight mail or hand-delivery to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9974-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may also be hand-delivery to the Washington, DC location: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW. Washington, DC 20201.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.