Susan Bauman
The Affordable Care Act, also known as “Obama Care,” was signed into law March 23, 2010. Its purpose: increase the affordability of health insurance and reduce the cost of health care. This will happen by way of mandates, tax-credits and subsidies.
Starting in 2010 to encourage small businesses to offer health care coverage, the government offered a Small Group Tax credit. This credit applies to tax years after Dec. 31, 2009. Also, businesses that elected to stay with the same coverage they had on March 23, 2010, are exempt from some of the requirements of the health care reform law; however, certain changes were required to be made to all plans.
Some of the highlights offered to date are dependent coverage for adult children under age 26, full coverage for preventative services in network, no prior authorization for emergency services, no pre-existing condition exclusions for children and no lifetime coverage limit. Small employers may take advantage of grants for wellness programs.
Though there are many provisions already in place, there are a lot of unknowns. The government has yet to finalize all the regulations and interim rules over the next few years. Most recently, the “pay or play” rules for large employers have been delayed. This is huge, as it means employers do not have to offer credible coverage or face a tax penalty until Jan. 1, 2015. It is believed this is the beginning of many bumps in the road to the long process of implementing the law.
Effective Jan. 1, 2014, subsidies for individuals and tax credits for small businesses will be available through exchanges. Americans cannot be turned away from the exchange regardless of gender or pre-existing conditions. This brings hope to many who have not been able to obtain or afford the plans currently on the market.
For business owners, the implications of the Affordable Care Act may be a bit confusing. For employers with 50 or more full-time employees (or full-time equivalent), they must offer group insurance plans including “essential benefits,” and the plans must not cost the employee more than 9.5 percent of their modified adjusted gross income. Otherwise, the business owner risks being penalized. Depending on the penalty, businesses may be charged $2,000 or $3,000 per employee.
For businesses with fewer than 50 full-time employees, there are a variety of options. Plans could be offered to the employees through the exchange or private insurers, owners could offer contributions to employees to offset the purchase cost, or they could choose to not offer coverage or assistance at all.
Effective Jan. 1, it is the responsibility of every American to make a decision whether to obtain health insurance coverage or pay a tax when they file with the IRS. The tax will be the greater of $95 or 1 percent of the person’s income. In addition, there will be a $47.50 tax for each dependent not covered. Should their employer offer them a plan that meets the essential benefit requirements and cost the employee less than 9.5 percent of their income as reflected on their W-2, the employee will not be able to buy a plan through the Exchange.
If the employer plan does not meet the above mentioned requirements and the employee’s income falls below the federal poverty level, the employee has the opportunity to go to the Nevada Health Link (Silver State Exchange) and qualify for Medicaid, or a subsidy toward their health plan on the exchange.
As a small business owner (fewer than 50 employees), you’re exempt from the ACA mandate of having to offer a group insurance plan. However, you might find it wise to offer coverage to attract and retain employees.
Small business owners can obtain a group plan through a broker by either a traditional private plan or a plan on the exchange once the Small Business Health Options Program, or SHOP, is available. Should you elect the SHOP option, have fewer than 25 full-time employees averaging less than $50,000 in annual compensation and you pay at least 50 percent of their premiums, you may qualify for a tax credit of up to 50 percent of the premiums you paid (35 percent for nonprofit organizations.). If there are 25 or more full-time equivalent employees, the credit is not available. Remember, the credits are only for businesses that join the SHOP in 2014.
A small business may choose to offer a private group health plan purchased directly through a private insurance company. You’ll still want to be sure the plans include the essential benefits and cover at least 60 percent of the cost of services offered. The other alternative is to offer a dollar amount or percentage of premium contribution to be paid to the employee as an increase in their income and recommend they work with their own broker.
No matter what plan is purchased, it must meet the “essential benefits,” including preventative wellness, maternity and newborn care, mental health, substance abuse, rehabilitation services and approved medical devices.
As the employer, should you decide not to offer a group health insurance plan, you can and should advise your employees to reach out to their own brokers or invite your company broker to educate them on their individual options. Besides the group health plans, many carriers are now offers supplemental coverage that works much like “gap” insurance and helps individuals manage their medical expenses. The supplemental plans are offered as a group through the employer but usually do not cost the employer anything other than time to process the employee’s deductions through payroll.
Small business owners are strongly encouraged to partner with their insurance broker, attorney and CPA when analyzing the options and determining which direction makes most sense for their business.
Susan Bauman is president of Western Risk Insurance and a member of Clark County Association Health Underwriters.