SHOP Marketplace
What is the SHOP Marketplace?
The Small Business Health Option Program (SHOP) Marketplace helps small businesses provide health insurance to their employees.
The SHOP Marketplace gives employers flexibility in how much of an employee’s premiums they want to pay. Employers can choose from up to 4 levels of health coverage and offer health only, dental only, or both health and dental insurance. Coverage can typically start at any time of the year.
Which small businesses qualify to use the SHOP marketplace?
Companies with 1-50 full-time equivalent (FTE) employees qualify as small businesses and may choose to offer health insurance through the SHOP Marketplace, if available in their state. (In Virginia, the SHOP Marketplace is open to employers with 1-100 FTE employees, and there may be other state-by-state exceptions.)
Companies can calculate their FTE employees by adding together full-time and part-time employees.- Add together full-time employees who work 30 or more hours per week.
- Add together all the hours of part-time employees (those that work less than 30 hours per week) and divide by 30. Round your results down to the nearest whole number.
The small business health care tax credit
How to qualify for employer health care tax credits| Full-Time Equivalent Employees | Average Salary | Employer pays at least this % of each employee's medical premium | |
|---|---|---|---|
| Qualification for Minimum Tax Credit | < 25 | < $52,000 | 50% |
| Qualification for Maximum Tax Credit | < 10 | < $25,000 | 50% |
-
To qualify for the minimum tax credit:
- The company must have fewer than 25 full-time equivalent (FTE) employees.
- Employees must earn an average salary of $52,000 or less for tax years 2015 and 2016.
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To qualify for the maximum tax credit:
- The company must have fewer than 10 FTE employees
- Employees must earn an average of $25,000 or less.
The tax credit is worth up to 50 percent of the costs of employee’s health-care premiums or 35 percent for non-profit employers. Other terms and details may apply in calculating eligibility for tax credits.
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Enrollment in a SHOP Marketplace health insurance plan
There is no limited enrollment period for the SHOP Marketplace, and employers can shop for a new plan any time of year. If an employer enrolls in a plan by the 15th of each month, coverage can usually begin on the 1st of the following month.
Employees can enroll themselves or their dependents in an employer’s plan when:- they are new hires,
- they have qualifying life events such as a marriage or the birth of a child, or
- the company's annual open enrollment event is underway.
Businesses must be sure that they take yearly action to renew SHOP Marketplace insurance, as businesses will typically not be automatically re-enrolled.
Who may not qualify for the SHOP Marketplace
Sole proprietors and those who are self-employed with no employees are not eligible for the SHOP Marketplace and must typically enroll in health insurance on the Individual and Family Health Insurance Marketplace. In some states, 1099 contractors may count as employees for some group plans offered by certain health insurance companies, though these plans may not always be available through the SHOP Marketplace. If a small business has at least one full-time employee who is not a spouse, a family member or another owner, then the business can enroll in a SHOP Marketplace plan.
The SHOP Marketplace is not available in every state; some states have their own health-care exchanges.
SHOP Marketplace and dependent coverage
While some states may require it, in general, small businesses participating in the SHOP Marketplace are not required to offer dependent coverage. If the employer does not provide dependent coverage, the dependents can enroll in health insurance through the individual Health Insurance Marketplace. Dependents not covered by the employer can be on the same plan as the employee if the employee pays the dependents’ premiums. The dependent may also qualify for a premium tax credit or cost-sharing reduction to help pay for coverage.
If the employer does offer dependent coverage, dependents can chose to accept it or buy coverage through the Health Insurance Marketplace. If an employee accepts dependent coverage offered by her company, the dependents that enroll with the employee generally must enroll in the same health-care plan as the employee.
The government defines a dependent as a domestic partner or spouse, or a child under 26.
NOTE: As of the writing of this article, there are various proposals for Congress to repeal or replace the Affordable Care Act, possibly including the SHOP marketplace, so the situation described in this article may change after publication. This material is for general information and is not tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors in managing your small business.
Want to learn more about group health insurance?
Check out our Small Business Health Insurance Guide
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