Employer contributions to employees’ health insurance premium is directly linked to affordability for employees. However, premium contributions are becoming more unaffordable for employers as well. Employers are increasingly looking toward benefit plans that shift a higher share of costs to employees or are choosing to stop offering coverage altogether. The Covered California SHOP must consider the extent to which it requires small businesses to make premium contributions on behalf of their employees.

The following options were considered:

• Option 1. Require contributions consistent with current market underwriting rules: Establishes minimum employer contributions at levels consistent with the current small employer market.
• Option 2. Require contributions at least meet minimum federal tax credit: Establishes minimum employer contributions at levels that ensure the tax credit can be taken, if other requirements are satisfied.
• Option 3. Require contributions at a level higher than current market or federal tax credit: Establishes minimum employer contributions at levels higher than the current market or federal tax credit requirements to qualify for a tax credit to support more affordable coverage for employees.

Covered California SHOP is going to go with Option 1 - matching current market underwriting rules - which require an employer to pay 50% of the employee’s premium for the lowest price plan among those options offered. Option 2, matching the federal tax credit rules would amount to nearly the same thing - 50% - but add unnecessary complexity. Option 3, higher requirements than the outside market, would negatively affect the SHOP’s enrollment.