SHOP Marketplace vs. Level-Funded Plans for Plumbing Shops
A side-by-side look at how the two most common small-business funding models actually work.
Updated January 2025 · 7 min read
The short version
SHOP is fully-insured coverage sold through the federal or state small-business exchange. It's the only way to claim the Small Business Health Care Tax Credit. No medical underwriting — every group gets the same community-rated price.
Level-funded plans are self-insured behind the scenes but priced like a fully-insured plan: you pay a fixed monthly amount, and if your crew's claims come in low, the carrier refunds the surplus at year-end. Underwriting is required.
Cost
SHOP plans are priced from a community pool — your specific crew's health doesn't change the rate. For a 5-person plumbing shop in a mid-cost ZIP, expect $520–$680/month per employee in 2025.
Level-funded plans are 10–25% cheaper for groups that pass underwriting. Same 5-person shop with a healthy, non-smoking crew often comes in at $410–$540/month per employee. If the group has multiple high-claim members, level-funded quotes can come back higher than SHOP — or get declined entirely.
Tax credits
SHOP unlocks the Small Business Health Care Tax Credit: up to 50% of the employer's premium contribution, for groups with fewer than 25 FTEs paying average annual wages under $61,400 (2025 threshold) and contributing at least 50% of employee-only premiums. Credit phases out as FTE count and wages rise.
Level-funded plans are NOT eligible for the SHOP tax credit. Premiums are still 100% deductible as a business expense.
Year-end refunds
SHOP: no refunds. The carrier keeps unused premium.
Level-funded: if your group's claims come in below the expected level, the carrier refunds 50–100% of the surplus (varies by carrier and contract). Plumbing shops we work with typically see refunds of $0–$18,000 at year-end depending on claims experience.
Who SHOP fits best
Owners with under 25 FTEs and average wages under $61,400 who want to capture the tax credit.
Crews with one or more members who would fail underwriting (recent serious diagnoses, pregnant spouse, etc.).
Owners who value predictable, community-rated pricing over potential year-end refunds.
Who level-funded fits best
Healthy crews (most plumbing shops with crews under 40 qualify cleanly).
Owners who want a shot at year-end refunds and lower monthly premiums.
Groups already above the SHOP tax credit thresholds (25+ FTEs or wages above $61,400 average).
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