SHOP: the Small Business Health Options Program, explained

Some states run their own SHOP. Others use the federally facilitated SHOP. The four eligibility points below are the federal HealthCare.gov rules. If your state runs its own program, we will check that state's process before you enroll.

SHOP is built for small employers. HealthCare.gov generally describes it as a program for businesses with 1 to 50 full-time equivalent employees, which is the headcount range this practice serves.

The four eligibility points

HealthCare.gov lists four requirements to offer SHOP health or dental insurance:

1. Headcount. You generally have 1-50 full-time equivalent employees. You must have at least one FTE who is not an owner, a spouse or family member of an owner, or a partner. Some states make SHOP available to employers with up to 100 employees. If you are already in a SHOP plan and the group later grows past 50 employees, HealthCare.gov says you can renew that coverage.
2. Offer to full-time employees. You must offer coverage to all full-time employees, generally those who work 30 or more hours per week. You do not have to offer it to part-time employees or seasonal workers, though you may.
3. Minimum participation. In most states, at least 70% of the employees you offer insurance to must enroll, or already have coverage from another source (a family member's job, Medicare, Medicaid, TRICARE, a veterans' program, or individual health insurance). Some states set a different rate. You do not have to meet the participation requirement if you apply or renew between November 15 and December 15.
4. A work site in the state. You need an office or employee work site in the state whose SHOP you want to use.

Confirm the current participation rate for your state on HealthCare.gov or with the SHOP Call Center before you count on a number. States can change their rates. As of the HealthCare.gov page we used for this copy, several states listed a rate other than 70%: Iowa, Louisiana, New Hampshire, South Dakota, Texas, and Utah at 75%; Tennessee at 50%; and Mississippi at 0%. Recheck those figures at enrollment. They are not a substitute for the current state list.

When you can enroll

Small businesses generally can enroll in SHOP coverage at any time of year, subject to the participation window described above. That is different from individual-market Open Enrollment.

HealthCare.gov states that waiting periods for new employees cannot exceed 90 days.

The Small Business Health Care Tax Credit

SHOP coverage is generally the path to the federal Small Business Health Care Tax Credit under Internal Revenue Code § 45R. An ICHRA or QSEHRA does not take the place of that SHOP requirement.

In broad terms, an eligible employer:

• Has fewer than 25 full-time equivalent employees
• Pays average annual wages below the inflation-adjusted limit
• Pays a uniform percentage, not less than 50%, of the premium for employee-only coverage under a qualifying arrangement
• Offers that coverage through SHOP

For tax years beginning in 2026, the IRS set the section 45R wage figure at $34,100. The credit begins to phase out once average annual wages exceed that amount, or once FTEs rise above 10, and it is reduced to zero at 25 FTEs. Under the statute, an employer is not an eligible small employer once average annual wages reach twice that figure, $68,200. For tax years beginning in 2027, the section 45R wage figure is $35,162.04, and twice that amount is $70,324.08.

The credit is available for a two-consecutive-tax-year credit period. For eligible for-profit employers, the maximum credit is generally 50% of premiums paid. For eligible tax-exempt employers, the maximum is generally 35%, claimed in the manner the IRS prescribes.

A tax advisor should compute the actual credit on Form 8941. We will tell you whether the company appears to be in the eligibility range; we will not quote a credit amount in a proposal. The full rules, including how owners and family members are counted, are on the tax credit page.

SHOP next to an HRA

You cannot combine SHOP coverage and an ICHRA for the same class of employees. You can offer SHOP (or another group plan) to one class and an ICHRA to another, subject to the class-size rules on the ICHRA page.

A QSEHRA is not available if you offer a group health plan to any employees, so SHOP and a QSEHRA are not a pair.

If you are deciding between a group plan and a reimbursement arrangement, start with ICHRA vs QSEHRA and this page, then we will put a recommendation on your census.

Companies with locations in more than one state

You enroll in SHOP in the state where your primary business site is located, or you may offer different SHOP plans in each state where employees work, if you meet that state's rules. HealthCare.gov describes both options, including how participation is counted. The details belong on our multi-state workforce page.

How we help

We will count FTEs the way SHOP expects, check participation, map work sites to the right state SHOP, and help you compare a SHOP plan with a defined-contribution HRA or a level-funded plan when more than one structure is on the table. If the tax credit appears to be in reach, we will flag it for your tax advisor rather than treating it as a sales point.

Request a SHOP proposal