SHOP sections of the notice of benefit and payment parameters final rule
May 6, 2013
On March 1, 2013, the Centers for Medicare and Medicaid Services issued the Notice of Benefit and Payment Parameters final rule for 2014. The final rule makes changes applicable to any state-based Small Business Health Options Program (SB-SHOP) and creates rules specific to a federally facilitated SHOP (FF-SHOP), including state-federal partnerships. Michigan currently plans to operate a state-federal partnership Marketplace.
In this final rule, CMS establishes a number of standards and processes for implementing the SHOP, beginning in 2014:
For 2014, CMS will not implement employee choice because of operational challenges and concerns. As a result, employers can only select one qualified health plan (QHP) to offer employees through the FF-SHOP. This change does not apply to a SB-SHOP, which may offer any sort of employer/employee choice. Since employers can offer only one QHP in 2014 on the FF-SHOP, HHS also proposed a delay of the premium aggregation function until 2015.
Beginning January 1, 2015, all SHOP models must allow qualified employers to begin offering employees a single QHP or all coverage plans available within a single metal level (bronze, silver, gold or platinum) in which an employee may choose a QHP.
Tying Issuer Participation in the Individual Marketplace to Participation on the FF-SHOP
An issuer’s participation in the Individual Marketplace is conditioned on the issuer’s participation on the FF-SHOP, provided that no issuer would be required to begin offering small group market products as a result of this provision.
For example, if an issuer or a member of the same issuer group has a small group market share of at least 20%, then that issuer and all members of the issuer group that already offer small group coverage (regardless of market share) must participate in the FF-SHOP in order to participate on the Individual Marketplace.
HHS indicated it will evaluate the tying provision on an ongoing basis for its effectiveness in enhancing employer and employee choice.
Minimum Participation Rate in FF-SHOP
This rule clarifies when and how a minimum participation rate may be imposed. The FF-SHOP must allow continuous open enrollment for small employers, though issuers may choose to deny coverage to small employers that fail to meet certain contribution or minimum participation requirements. However, those restrictions must be lifted during an annual enrollment period from November 15 through December 15.
For the FF-SHOP, the minimum participation rate is 70 percent.
The FF-SHOP may adopt a different uniform minimum participation rate if state law sets the rate, or the majority of QHP issuers in that state use a different rate for small group products.
Methods for Employer Contributions
Employers must choose a contribution method before employees select their QHPs so employees know their net cost after the employer’s contribution. To facilitate this, each SHOP must offer “safe harbor” methods of contributing toward the employee coverage. One such method available in FF-SHOPs will base the employer contribution on the cost of a reference plan, chosen by the qualified employer, in the same level of coverage chosen by the employee.
Regardless of the contribution method they choose, an employer may not establish different contribution percentages for different employee categories (i.e. part-time, full-time, seasonal, etc).
Determining Employer Size
The definitions of “small employer” and “large employer” are amended, consistent with proposed rules issued in November 2012, to specify that the full-time equivalent method (derived from the employer mandate rule) will be used for determining employer size for purpose of SHOP participation.
For each month of the preceding calendar year, employers are required to—
- Determine full-time employees: the number of employees who worked at least 130 hours in the month;
- Determine full-time equivalent employees: for all other employees, divide hours worked in the month (capped at 120 hours for any employee that works fewer than 130 hours) by 120;
- Add the full-time employee and full-time equivalent tallies for each month of the year; and
- Compute an average.
If the average number of employees is 50 or fewer, the employer is a small employer for purpose of SHOP participation.
This method of determining SHOP eligibility will be re-evaluated before 2016, when the small group market in all states increases to 1-100 instead of 1-50.
Definition of a Full-Time Employee
An employee who is employed an average of at least 30 hours of service per week, subject to the transitional policies discussed below, is considered a full-time employee. This definition determines employers’ eligibility to participate on the SHOP.
Most states currently use methods for determining group size that differ from federal definitions. HHS believes that certain Affordable Care Act provisions require that a federal definition be used; therefore the definitions of “small employer,” “large employer,” and “full-time employee” will generally be effective for plan years beginning on or after January 1, 2016. However, the FF-SHOP will begin using the full-time equivalent method to count group size in 2014.
Where can I find more information?
More information can be found at in the final Notice of Benefit and Payment Parameters for 2014.
The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.