ACA and Small Businesses 101

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There’s no doubt that the average small business owner in the United States is under a great deal of pressure while also juggling several different roles within the company, including the often unwanted title of “Benefits Advisor.”Now that it’s 2014 and many of the ACA employer mandates have either taken effect or are looming in the future, small business must stay on top of what all these mandates mean for them, their business, and ultimately, their employees.

An article on the Employee Benefit Advisors website outline 10 common questions from small businesses regarding ACA compliance from Health Partners America’s whitepaper 10 ACA FAQs for Small Employers:

1. What’s the ACA definition of ‘small employer’?

Not always the most clearly defined terms insurance companies have for determining this, according to HPA’s 10 ACA FAQs for Small Employers they “generally count all employees (full- and part-time) and companies with 50 or fewer total employees as small groups in most states; although in some states the cut-off is 100 employees.” HPA also notes that for 2016, every state will classify a small employer as one with 100 or fewer total employees. The group also notes that as of 2016, companies with 100 or fewer total employees will be classified as a small employer in every state.

2. How does the ACA change the health plans small employers are offering to employees now?

The biggest change will occur to non-grandfathered plans in regards to the following:

– Essential health benefits- Must now offer plans that cover the 10 essential benefits with no annual or lifetime dollar limits.

– Cost sharing limitations- Must now follow actuarial values, out-of-pocket limits and deductible limits.

– Modified community rating rule- Probably the biggest change for small businesses, insurance companies can no longer rate based on group size, industry, gender or health status.

3. Will small-group health plans be more expensive?

According to HPA’s whitepaper, it depends. For example, smaller employers that have previously paid rates above average based on their group’s characteristics will actually see a decrease in their premiums. Other with younger, healthier employees are seeing a significant increase their previously below-average premiums.  

4. Are small groups required to provide insurance to employees under the ACA?

Employers with fewer than 50 full-time equivalent staffers are not required to provide health coverage and at this time, there are no plans for penalizing them for not doing so.

5. Is there financial assistance available if a small employer does decide to offer or continue offering health coverage?

According to HPA, those not offering coverage may be eligible for a small group tax credit. However, it’s dependent on variables such as the number of employees they have and these employees’ average wages. “The credit … is available for employers with 25 or fewer full-time equivalent employees and $50,000 or less in average wages, though the available credit begins to decline on a sliding scale for companies with more than 10 employees or more than $25,000 in average wages.”

6. Do small employers have to purchase coverage on SHOP?

The Small Employer Health Options Program exchanges, known as SHOP, are available in each state for enrollment by paper or call center. Online enrollment is slated to be open in November 2014, and whether an employer must enroll is dependent on whether or not they claim the tax credit. Those employers who do not to claim the tax credit will not be required to go through SHOP.

7. Does it benefit the employees when a small employer offers health insurance?

Employees can benefit from an employer contribution to their health premiums, “also, employees have the option of paying for their share of the employee and dependent premiums with pre-tax dollars if the employer has an IRS Section 125 plan in place,” HPA’s report states. However, in some cases employees might be better off purchasing health coverage on the ACA’s public exchanges and small businesses should consult a broker to discuss the advantages/disadvantages of these scenarios.

8. Is there any reason a small employer should not offer health coverage?

There are some situations in which employees may come out better by going through the public exchanges and receiving government assistance for their coverage. However, employees working for companies currently offering coverage will not be able to receive the subsidy. Therefore, some businesses who employee several individuals eligible for the subsidy may want to rethink offering insurance.

9. Can a small employer drop its group health coverage and reimburse employees for the cost of individual health insurance policies?

Yes, a small employer can drop group health coverage and there are options on how they compensate employees for the cost of healthcare expenses.  According to HPA, “The federal government issued guidance in September of 2013 indicating that most [pre-tax] reimbursement arrangements would not only disqualify individuals from receiving a premium tax credit but would be out of compliance with the law’s requirement to offer up-front preventive care and to cover essential benefits with no annual dollar limit.”  However, the whitepaper also suggests ways for employers using cafeteria plans to help employees “purchase voluntary benefits like accident, critical illness, and cancer insurance or deposit money into a pre-tax spending account like a Health Savings Account (HSA) or Flexible Spending Account (FSA) to help with out-of-pocket costs.” Other employers are also providing post-tax contributions to help offset the cost of individual insurance policies.

10. How can a small employer help employees sign up on the public exchanges if they don’t offer coverage or are dropping coverage?

There are state and federal websites that can help employers to provide more information on how their employees can obtain coverage, including looking to brokers for more guidance as they can help consumers obtain coverage free of fees.

Read the full article on the EBA website or download the complete whitepaper from HPA here

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