By: B. Smith, May 2010
Today, Small businesses work hard to purchase health care coverage that is competitively priced. This is compared to coverage premium discounts that large companies can negotiate simply because of the size of their risk pool.
Starting in 2014 that is going to change as States start to offer insurance ‘pools’, called SHOP Exchanges, for small businesses to purchase health care coverage for their employees. Small business are defined by the legislation as a company that has less than 100 employees, but States may choose to use 50 employees as the benchmark total until 2016 for their definition. Under the Health Care Reform Law, whatever the total is used for a definition of ‘Small Business’ it will include counting part-time employees towards the grand total.
SHOP Exchanges, Small Business Health Care Options Programs, are not in existence today. But, the SHOP Exchange business will heat up within the next couple of years, as the deadline gets closer. The SHOP Exchange for small business will be run by the States and will vary on size and premiums as the pooling and purchasing process are defined during the creation process.
Why is a SHOP Exchange a good thing? According to the legislative thought process, by bringing a number of small businesses together, or pooling the smaller groups of into larger block, collectively all the businesses will benefit from better premiums since the risk pool for the health care company will be bigger and the premium risk is spread across all the enrollees.
Also, SHOP Exchanges will start to gain ground since the Health Care Reform Law requires all employers, small or large, to offer employees coverage or face penalties. Starting in 2014 a business can be fined $750 per full time employee not offered coverage. Penalties for lack of coverage being available will increase over time and failure to meet minimum benefit levels could subject companies to additional penalties.
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