Federal Online SHOP Enrollment Delayed; Small Business Tax Credit Options Remain

Small businesses wishing to purchase health insurance via healthcare.gov, the federal health insurance marketplace website, will have to wait until November 2014 to do so, according to an announcement by the Department of Health and Human Services. The initial planned launch of the Small Business Health Options Program, known as the SHOP exchange, was originally slated for this past October. Small businesses in the 36 states that currently use the federal government’s health insurance marketplaces will still be able to compare plans, but will have to purchase coverage through:

• Insurance brokers or agents, or
• Directly through an insurance company.

This does not impact the 14 states and District of Columbia that run their own marketplaces. And while the ways in which small businesses obtain health plans in federally facilitated SHOPs  may remain largely unchanged until 2015, the recent announcement is not a delay in the SHOP program itself.

This delay still allows businesses to sign up for SHOP through paper applications, which they have been able to do since October 1. According to reports from The New York Times, a broker, agent, or insurer can help an employer throughout the signup process in a variety of ways, including:

• Help complete and send a paper application for SHOP eligibility to the SHOP marketplace;
• Tell employers what premiums they would have to pay; and
• Enroll workers.

One of the advantages of using SHOP to obtain coverage is the opportunity to obtain a small business tax credit. This delay will not impact qualifying small businesses from filing for a tax credit in 2013, but they would need to obtain coverage through SHOP to be eligible to file for the tax credit for the 2014 plan year.

The small business tax credit first became available in 2010 with no stipulation regarding where a company purchased coverage. Beginning in 2014, companies have to purchase health coverage through the marketplace to receive such financial assistance, worth as much as 50 percent of the employer contributions to workers' premiums.

Although purchasing health coverage through SHOP is voluntary, choosing to go this route in order to apply for tax credits could be beneficial for small businesses. L.A. Daily News cites a scenario where a business owner with 10 full-time employees who earns up to $250,000 in annual wages could be eligible for a $35,000 tax credit in 2014 if he or she purchases coverage for employees via SHOP. This potential cost relief is advantageous for eligible employers, particularly in a state such as California where the L.A. Times reports that more than half of small businesses with three to nine workers can’t afford to offer health insurance to their employees.

Despite the delay for small businesses to purchase coverage online, the opportunity to get coverage through SHOP and obtain tax credits both remain intact. As John Arensmeyer, CEO of advocacy group Small Business Majority, points out, "The fact [is] that the marketplace can offer the most competitive combination of price and quality for small businesses purchasing health insurance."