CMS recently issued guidance which extends their transitional policy (originally put in place in 2015) to allow state-based marketplaces to continue to leverage direct enrollment (which is different than individual DE) for their SHOP solution through plan year 2018, rather than building their own stand-alone SHOP exchange. Beginning in 2019, state-based marketplaces who are currently utilizing direct enrollment for their SHOP must implement one of three options: a) notify CMS at least nine months prior to open enrollment they want to use the federal SHOP platform which includes (at least as of today) a 3.0% user fee, or b) share a SHOP platform with another state, or c) apply for a Section 1332 Innovation Waiver.

PEC’s analysis: It is our belief CMS issued the attached guidance because most states who are leveraging either broker or carrier direct enrollment functionality today for their SHOP solution do not have any immediate plans to move to their own SHOP platform. Low SHOP enrollment, difficulties with their current individual solution, and a lack of additional federal matching dollars are the biggest reasons why.

In addition, these additional two years of relief and the corresponding options CMS provides for state-based marketplaces to transition beginning with the 2019 plan year implies CMS is interested in state-based marketplaces leveraging existing public and private small group technology solutions rather than building their own. This could mean fewer opportunities for companies looking at selling state-based SHOP solutions, but more opportunities for companies who have existing small-group solutions in SBM states currently leveraging SHOP direct enrollment or manual solutions like HI, VT, ID, and MN.

Read the full guidance from CMS here