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Final SHOP Regulations Delay Employee Choice and Premium Aggregation Features, Shorten Special Enrollment Periods

From the June 06, 2013 EBIA Weekly

[Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Small Business Health Options Program, 45 CFR Parts 155 and 156, 78 Fed. Reg. 15553 (June 4, 2013); Small Business Health Options (SHOP) Health Coverage Application for Employers;]

Regulations

Employer Application

Employee Application

HHS has issued final regulations further amending Small Business Health Options Program (SHOP) rules to include a transitional policy for the “employee-choice” model in federally facilitated SHOPs (FF-SHOPs) and state-operated SHOPs, and to align the SHOP special enrollment periods with the requirements under HIPAA portability. Adopting the rules primarily as proposed in March 2013 (see our article), the final regulations amend standards that were established for SHOPs by final Exchange regulations published in May 2012 (see our article) and by final parameters regulations published in March 2013 (see our article). HHS has also posted a four-page SHOP application for employers that cannot apply online or are not working with a broker, and a two-page application for their employees. Here are highlights of the final regulations:

Delay of Employee Choice and Premium Aggregation. The final regulations delay for one year mandatory implementation of the SHOP “employee-choice” model, which gives employees a choice among all qualified health plans (QHPs) at the metal level chosen by the employer (bronze, silver, gold, or platinum). For plan years beginning before January 1, 2015, FF-SHOPs will not offer an employee-choice option (meaning employers will select the single QHP available to their employees); state-operated SHOPs may, but are not required to, offer an employee-choice option. Mandatory implementation of the SHOP premium aggregation function, designed to assist employers with employees enrolled in multiple QHPs, is similarly delayed.
Alignment of Special Enrollment Periods. For most applicable triggering events (e.g., a qualified individual or dependent losing minimum essential coverage or a qualified individual gaining a dependent or becoming a dependent through marriage, birth, or adoption), the final regulations establish a SHOP special enrollment period of 30 days (for consistency with HIPAA’s special enrollment rules). For the triggering event of loss of Medicaid/CHIP eligibility or becoming eligible for premium assistance under Medicaid/CHIP, however, the final regulations maintain a 60-day special enrollment period.
Linking of FFE and FF-SHOP Certification Requirements. Responding to comments on the final parameters regulations, the preamble to these final regulations also addresses QHP certification requirements that link federally facilitated Exchange (FFE) and FF-SHOP participation. HHS declined to revisit, for 2014, rules requiring insurers with greater than 20% small group market share to offer at least one silver-level QHP and one gold-level QHP through the FF-SHOP as a condition of participation in the individual market FFE, but says it intends to evaluate for future years the effect of the linked certification standard on employee choice in SHOPs.

EBIA Comment: Citing new premium rating rules for 2014 that significantly reform rating practices in many states and were only finalized in February (see our article), insurers have expressed concern that implementing the SHOP employee-choice feature would complicate SHOP QHP pricing. According to the preamble, the delay has been prompted by this, along with insurer comments suggesting that making systems and operational changes required for SHOP enrollment and premium aggregation would compete with efforts to prepare for participation in the Exchanges. (A recently posted HHS fact sheet indicates that the federal marketplaces are still on track for open enrollment beginning in October 2013.) For 2014, the small business health care tax credit will be tied to SHOP participation, so small employers who want the credit will be beholden to SHOPs despite the lack of its central feature—choice of QHP options for employees of small employers. For more information, see EBIA’s Health Care Reform manual at Sections XXI.D (“Small Business Health Options Program (SHOP)”) and XXVI.G (“Small Business Health Care Tax Credit: How Is the Credit Amount Determined?”).