The Department of Health and Human Services (“HHS”) issued final regulations in late May 2014 in which it proposed making two significant changes to the Small Business Health Options Plan (“SHOP”) requirements. First, the requirement for SHOPs to offer the employee choice model to employers beginning in 2015 would be delayed until 2016 in 18 states where a delay was recommended by state insurance officials and approved by HHS. Second, the annual open enrollment period for SHOPs would be modified to align more closely with the annual open enrollment period in the individual market and certain minimum time frames would be removed. The final regulations issued by HHS implement the proposed rules with minor modification.
SHOP Employee Choice Model
Under the employee choice model (that was originally scheduled to be implemented in 2014), employers eligible to purchase SHOP coverage for their employees would have two choices. The employer could select a single Qualified Health Plan (“QHP”) to offer to all of its full-time employees. Alternatively, the employer could select a metallic level of coverage – such as silver – and each eligible full-time employee would be able to select any QHP offered within the metallic level by the SHOP. However, as the result of operational concerns, the implementation of employee choice in federally-facilitated SHOPs (“FF-SHOPSs”) was delayed until 2015. Most state-operated SHOPs did implement the employee choice model in 2014.
HHS states that during early 2014 communications with state insurance commissioners and issuers they became concerned that the implementation of the full employee choice model in 2015 might significantly disrupt some small group markets. State insurance commissioners and issuers had concerns about the potential for adverse selection in the small group market resulting from employee choice. Regulators were concerned that this uncertainty could lead carriers to price their policies more conservatively which could impact small employers’ ability to offer affordable plans. To address this concern, HHS proposed a one-year transition policy under which a SHOP would be permitted to delay implementation of the employee choice model until 2016 if in the opinion of the state insurance commissioner: (1) employee choice could result in significant adverse selection in the state’s small group market that could not be fully remediated by the single risk pool or premium stabilization programs; or (2) there might be an insufficient number of issuers offering QHPs to allow for meaningful plan choice for all actuarial value levels in the state’s SHOP. Under the proposed regulation, a state department of insurance could submit a recommendation (based on concrete evidence, including but not limited to discussions with issuers expected to participate in the SHOP in 2015) that employee choice not be implemented in that state in 2015 because the insurance commissioner believes it would not be in the best interest of small employers and their employees. Insurance commissioners were required to submit their recommendations to HHS on or before June 2.
HHS reviewed letters from insurance commissioners and approved a delay until 2016 for 18 states:
The fourteen states with FF-SHOPs that will implement the employee choice model in 2015 are: Arkansas, Florida, Georgia, Indiana, Iowa, Missouri, Nebraska, North Dakota, Ohio, Tennessee, Texas, Virginia, Wisconsin and Wyoming.
Most state-operated SHOPs already offer employee choice. Those that do not currently offer employee choice will also be permitted to delay implementation until 2016. HHS will post the decisions of state-operated SHOPs as soon as all states have reported their decisions.
Annual Open Enrollment for 2015
In late March 2014, HHS proposed changing the dates for the annual open enrollment periods for employers and employees in all SHOPs – both state and federally-facilitated – beginning with the 2015 plan year. This change in the annual open enrollment period would align the SHOP annual open enrollment period with the annual open enrollment period in the individual Marketplace. Under the proposed rules the annual employer and employee election period will begin on November 15, 2014.The proposed rule has been adopted with one modification – state-operated SHOPs may begin their annual open enrollment period earlier than November 15, 2014.
The March regulations also proposed removing certain minimum time periods for annual open enrollment. The final rules remove the required minimum lengths of both the annual employer election period and the employee open enrollment period which is intended to give SHOPs and qualified employers more flexibility. This change was made in response to comments that the minimum time periods in prior regulations could under certain circumstances result in a time frame of 75 days or longer to complete a group renewal (i.e., 30 days for an employer to select a QHP or metallic level+ 30 days for employees to enroll + 15 days before coverage becomes effective.)
Gallagher Benefit Services, through its compliance experts and consultants, will continue to monitor developments on healthcare reform legislation and regulation and will provide you with relevant updated information as it becomes available. In the interim, please contact your Gallagher Benefit Services Representative with any questions that you may have.
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