SHOP, drop, roll or self-insure: It’s not too late to examine all health insurance options and switch

The 2015 tax season will soon be in the rearview mirror. But that doesn’t mean businesses should stop evaluating health insurance options. Since the dawn of the Affordable Care Act (ACA), businesses have been trying to figure out what’s the best route to take when it comes to health care coverage. There are a handful of options — all with unique pros and cons.

“Health care insurance options are something all businesses should be evaluating continuously,” says Joe Popp, tax manager at Rea & Associates. “Just because a business decides one route is best right now doesn’t mean that it will be the most effective or efficient choice down the road.”

Smart Business spoke with Popp about five health insurance options — Small Business Health Options Program (SHOP), drop, roll, self-insure and private exchange.

What is the SHOP and who benefits?

The SHOP is the business portal to exchange insurance. Right now in Ohio, it’s available only to companies with fewer than 50 full-time equivalent employees.

It’s best for a company that is having trouble paying for coverage or doesn’t want to contribute a lot for insurance, and whose employees generally wouldn’t get a premium tax subsidy. The employer can put as much or as little toward insurance as it wants, but the employees still can pay with a pre-tax deduction.

The drop option is self-explanatory, but doesn’t it hurt the employees?

If a business drops health insurance coverage altogether, employees would have to buy insurance on their own. If the employee qualifies for premium subsidies or cost sharing they often get better quality coverage for a lower price than with their employer.

Dropping coverage may be the best option for companies whose employees would be eligible for premium subsidies, meaning relatively low income individuals or families with many children and relatively high income (single breadwinner families).

How does roll work?

You continue with your current coverage, even though it may be inefficient in the short term. Many people decided last December to renew early and roll over coverage to get another year of reduced ACA compliance and cost.

This is typically the best option for those with more than 50 employees who want to take a wait and see approach. With uncertainties in legal challenges, new requirements coming online in future years and the exchanges still in their infancy, choosing to delay a major change for a few years is a perfectly fine strategy.

What is the self-insure option?

The employer takes on the risk that an insurance company normally takes, up to a certain dollar amount, and gets a stop-loss plan over the top for a smaller premium. The employees still pay into a system, but often at lower amounts.

For the employer, some years you’ll ‘win’ and some you’re going pay a few large deductibles. As long as, on average, you come out better in the years when no one has high medical costs, the business as a whole wins. This is a good option for those with 100-plus employees as they can more effectively spread risk.

How does the private exchange operate?

Instead of using the federal government’s exchange, you access a custom exchange with a smaller set of providers. It’s best for employers with 100-plus employees.

Your company can set up a private exchange and employees pick what they want with a monthly stipend. The employer contribution might cover the bargain basement $6,000 deductible coverage, and if employees want better coverage, they pay in. It’s like shopping on with a gift card from the employer.

When do employers need to make a decision?

Before your next insurance renewal date, evaluate these options to see if one is more efficient. Think about it, talk to employees and run numbers to see what it could do for employer and employee costs. Do the groundwork now, even if you don’t end up making a change until next year or after.

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