Health Insurance Options: SHOP, Drop, Roll, or Self-insure?

Joe Popp | November 14th, 2013

You may recall the popular saying, “Stop, Drop and Roll.” This is what we were taught in case a piece of our clothing or hair caught on fire. This same clever saying can (in a roundabout way) be applied to the list of options that businesses now have because of Obamacare. SHOP, Drop, Roll or Self-insure. 

There are a number of options that you should consider to help lower the potential danger that health care reform may pose to your business’s bottom line. These are four options – SHOP, drop, roll or self-insure – that every business should contemplate. If you decide just one of them is best and ignore the others, you might be missing out on the best option for your business.

SHOP – Small Business Health Options Program

If you’re an Ohio small business with fewer than 50 employees, the Small Business Health Options Program (SHOP) might be an option for you. This is the business portal to the insurance exchanges. This exchange:

  1. Allows you to get out of higher risk small insurance pools
  2. Enables you to give out pre-tax payroll deductions to your employees
  3. Allows employers to set the contribution dial from 0 percent to 100 percent

Businesses that meet certain goals also may be entitled to a tax credit. No federal premium subsidies are available for SHOP participants. In a few years, companies with less than 100 employees will be allowed to use this option in Ohio. SHOP is best for businesses who have high group costs and whose employees are not eligible for subsidies.

Drop … Health Insurance Coverage

You also have the choice to drop employee coverage and allow your employees to go to the insurance exchange. If you drop coverage and employ 50 or more employees, you will be subject to a shared responsibility penalty. Employees must use after-tax dollars to buy insurance through the exchange. However, premium subsidies are allowed. It’s possible for you and your employees to financially come out ahead (savings from premiums and lesser penalties). You can drive wage increases to employees who would be harmed by the dropping of coverage. This option is typically best for companies who have a majority of employees that would get premium subsidies.

Roll … With Private Insurance Coverage

If you’re ineligible for the SHOP and dropping health care coverage isn’t an option for you, could continuing with your private insurance coverage be best for you? You may realize cost savings if the plan quality is diminished (from 70 percent actuarial value to 60 percent, for example) or if the premium share amount is shifted between your employees and you. Large employers should fully understand their compliance with the Obamacare “pay or play” mandate before adjusting the dial on coverage quality or cost share to avoid penalties. The “roll” option is probably most useful for employers who want to spend a little more time deciding what to do or to see how the markets react and how the exchanges work.

Self-Insure

You have a fourth and final option related to health care insurance. You can move toward a self-insured product with a stop-loss policy over the top. This allows you to assume some of the risk an insurance company typically assumes. You may be able to offer far better coverage than the price of the insurance to participants and to you. There are several new fees and reporting requirements that you are responsible for with this option (you basically function like an insurance company and so have to start abiding by the restrictions and rules on those companies). This is an increasingly attractive option for companies with 100 or more employees. Self-insuring offers companies the ability to choose the level of risk they are willing to take on in return for being able to offer lower premiums.

Obamacare & Health Insurance Help

Not sure which option is for you or where to start to determine what is best for your business? Contact Rea & Associates. Our team of Ohio tax professionals can help you evaluate all of the options available to you and ultimately help you decide which option makes the most sense financially for your business.

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