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How should Maryland SHOP eligibility work?

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Regulators could face plenty of complicated choices as they go about building the “other exchanges” — the Small Business Health Options Program (SHOP) exchanges.

SHOP exchange builders will have to think about topics such as how to count employees and what eligibility criteria to set for participating businesses, Kevin Yang said in a SHOP presentation prepared for the Maryland Health Benefit Exchange Board.

A SHOP exchange manager also will have to see to tasks such as getting carriers to agree to a uniform billing and collections cycle and deciding what to do when employers fail to pay premiums, Yang said.

The board considered the presentation at a recent meeting in Baltimore.

Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the exchange program in an effort to make the process of shopping for health coverage more efficient for individuals and small employers.

If PPACA takes effect on schedule and works as expected, exchanges — Web-based health insurance supermarkets — will sell standardized health insurance packages to individuals and also to small groups.

The plans will come in four “metal levels” — Platinum, Gold, Silver and Bronze — with metal levels based on the percentage of the actuarial value of a standard package of benefits that the plan will pay for.

Some states have refused to take any steps toward building exchanges.

The Maryland board has been active at setting up its exchange and has been taking steps such as exploring the role of producers in the exchange environment and starting the process of the developing the information systems needed to run an exchange.

In the Maryland SHOP presentation, Yang said that a state must establish a SHOP to get certification from the federal Centers for Medicaid & Medicaid Services (CMS) as a PPACA state-based exchange.

A SHOP exchange must be able to certify the plans that can sell coverage through the exchange, determine which employers are eligible to use the exchange, help employees enroll through the ordinary open enrollment process and through special enrollments, and perform premium aggregation, billing and collections.

Maryland intends to give brokers and agents a “prominent role” in its SHOP programs, and it intends to certify third-party administrators (TPAs) — independent plan administrators — to perform SHOP-based services, Yang said.

In Maryland, the state will set the size limit for eligible small groups at 50 until 2016, Yang said.

Yang gave counting employees as an example of a function that Maryland exchange board must consider.

The Maryland SHOP could count each part-time employee as being equivalent to a full-time employee, or the SHOP could add up the hours of part-time employees to calculate full-time equivalents, which is the approach the Internal Revenue Service now uses for tax credits, Yang said.

“Aligning to federal rules may require changes in Maryland law,” but using the state definition could be confusing, Yang said.

If the definitions of “small group” are different in and out of the exchange, that could lead to adverse selection, Yang warned.

Yang noted another policy choice: About whether SHOP carriers can impose minimum participation requirements.

Maryland now lets small group carriers require that at least 75 percent of a small employer’s employees agree to participate in a small group plan, to avoid adverse selection.

“If carriers continue to require a 75 percent employee participation rate for off-exchange products, certain employers may opt to purchase SHOP [plans] to avoid the minimum participation requirement if an equivalent minimum doesn’t exist on the exchange,” Yang said. 

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