SHOP Ancillary Benefits Administration
The California Exchange, Covered California, is exploring its options for offering the administration of ancillary benefits such as COBRA and Cal-COBRA, Flexible Spending Accounts (FSAs) or Section 125 accounts, Health Savings Accounts (HSAs), or Health Reimbursement Arrangements (HRAs). Offering these ancillary benefits would give the Exchange value-added benefits that facilitate one-stop shopping for small businesses and agents at a modest cost. In general, agents place a high value on one-stop shopping and offering a full array of services to the agent and small employer. For those agents not currently offering such services, employer benefits administration would make the Exchange an attractive distribution channel.
Core services include Cal-COBRA and COBRA Administration and Section 125 Cafeteria plans. Often known as “POP Plans” or Premium Only Plans (under IRS Section 125) allow employers to deduct employee premium contributions on a pre-tax basis. This has a direct savings impact for employees as they can deduct employee, dependent and other qualified payroll deductions before federal, state and other payroll taxes, thus slightly reducing their share of premium. These plans are popular for small business groups and should be considered as a core service or value add for the SHOP exchange.
The Exchange staff is currently exploring the option of offering limited ancillary benefits administration through selected vendors to maximize its flexibility in program design. This approach also allows the Exchange to prioritize specific services and add programs in subsequent years based on employer and agent interest. If, however, fees and implementation costs are lower through a single vendor and there is no material difference in quality, The single vendor option may be preferred.