How many people get insurance through SHOP?

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Pursuant to the Affordable Care Act, the SHOP Marketplace (Small Business Health Options Program) was created to provide qualified employers with lower costs on group plans and claim tax credits.

Four sources indicate the extent of enrollment in Small Business Health Options Program marketplaces. First, the Centers for Medicare and Medicaid Services blog has occasionally reported on enrollment through the healthcare.gov portal, which applies to only some states and even in those state SHOP enrollment may occur outside healthcare.gov. More recently, it also offered a nationwide estimate. Second, the March 2017 Mercatus-Mulligan survey of small businesses asked managers about their organization’s participation in SHOP. Third, the U.S. Government Accountability Office (GAO) has occasionally reported on participation in the Credit for Small Employer Health Insurance Premiums, which requires enrollment in qualified health plan offered through a SHOP Marketplace (there are transitional exceptions in Iowa and Wisconsin). Fourth, the Department of Treasury has reported the aggregate dollar amount of the tax credit as part of its annual tax expenditures report.

Table 1 summarizes the results. The top row is the most recent GAO report, showing 181,004 small businesses claiming the credit for tax year 2014. Assuming eight persons insured through SHOP for each small business participating, that is about 1.5 million people insured through SHOP, via a business receiving the tax credit. The GAO also reports an aggregate amount of the credit of $541 million for tax year 2014. The U.S. Treasury’s Tax Expenditure Report shows essentially the same dollar amount for fiscal year 2014, which is why the table’s second row shows essentially the same number of businesses receiving the tax credit.

Receiving the credit is not necessary for participating in SHOP, and credit receipts among SHOP participants may be less common over time because, beginning in tax year 2014, a business’ eligibility is limited to two years. In other words, tax year 2016 was the first year that a small business could find itself ineligible for the credit solely because of participation in prior years. Consistent with this, the Department of Treasury reports a similar dollar amount for fiscal year 2015 and then a sharply lower amount in fiscal year 2016. At the same dollars per business, the fiscal year 2016 dollar amount translates into only 53,532 businesses receiving the credit.

The recent Mercatus-Mulligan survey of small businesses, projected to nationwide totals, shows about 118,000 businesses participating in SHOP with about 53,000 of them receiving the tax credit. The 53,000 is remarkably close to what can be inferred from the Treasury reports. It is difficult to know total participation prior to 2016, except that it is bounded below by the number of businesses receiving the credit. In particular, we cannot assume that the ratio of credit-receiving businesses to total SHOP-participating businesses has been constant over time because of the new credit-eligibility criterion that began in 2016.

Overall, it appears from the first three sources that almost one million people were recently insured through SHOP, and more than one million were insured that way in 2014 and 2015.

However, Centers for Medicare and Medicaid Services tells a very different story. Its nationwide enrollment of persons and businesses is a factor of four less. Of course, CMS is not aware of the Mercatus-Mulligan survey but it would be nice if they would explain how to reconcile their enrollment reports with GAO’s and Treasury’s reports of small business health tax credit participation and dollar amounts.  Absent that reconciliation, my guess is that CMS — both under Obama and Trump — have drastically underestimated the importance of SHOP.