A few tips regarding the Affordable Care Act
A few tips regarding the Affordable Care Act: As a result of the Affordable Care Act (“Obamacare”) consumers will be able to purchase health insurance using the new Health Care Exchanges, or “Marketplace” beginning October 1st. Many small business owners are confused about how this affects them so I wanted to use this month’s newsletter to answer some common questions that employers with 1 to 5 employees might have.
1. How does the Affordable Care Act impact me as a small business owner?
Small businesses may now purchase health coverage through the Small Business Health Options Program (SHOP) Marketplace however no employers are required to offer health coverage.
Starting in 2014, businesses with 50 or fewer full-time employees have the option of using SHOP to offer coverage to their employees. You control the coverage you offer and how much you pay toward premium costs.
Health coverage through SHOP starts as soon as January 1, 2014. Open enrollment begins October 1, 2013. You can sign up and begin offering coverage any time during the year.
2. Am I required to provide any sort of notification to my employees regarding ACA?
This is important. Please go to: https://www.healthcare.gov/what-do-i-need-to-tell-my-employees-about-the-marketplace/ and download the appropriate notification form. Give one copy to your employee and save another copy in his or her employee file. Have the employee initial the file. You must provide this notice to all of your current employees and to any new employee you hire going forward.
3. What are the benefits of purchasing group health insurance through SHOP?
SHOP will provide a “one-stop-shop” for small business owners to sign up, select, manage and pay for insurance. Plans in the Marketplace are primarily separated into 4 health plan categories — Bronze, Silver, Gold, or Platinum — based on the percentage the plan pays of the average overall cost of providing essential health benefits to members.
The plan category you choose affects the total amount your employee will likely spend for essential health benefits during the year.You select what level of coverage you want to provide and what percentage of the premium you will cover. Your employees can compare providers and select the one that is right for them. This means that while you may have coverage through Blue Shield and your employee gets their coverage through Kaiser, no additional administration is likely to be required on your end.
Additionally, if you have fewer than 25 full-time equivalent employees making an average of $50,000 a year or less, you may qualify for a small business health care tax credit. Consult with your CPA for details.
- Starting in 2014, the tax credit is worth up to 50% of your contribution toward employee premium costs (up to 35% for tax-exempt employers). This will make the cost of providing health coverage lower.
- Beginning in 2014, the small business health care tax credit is available only if you get coverage through SHOP.
4. I have 1 full time employee and I currently give her $200 per month to pay for her own insurance. Do I benefit by using the Health Care Exchange?
Yes, absolutely. The custom of providing a “stipend” for employees to purchase their own health insurance is a Band-Aid fix that has become popular in the last couple of years. This is mostly because employers with one or two employees perceived that it was too difficult or costly to purchase a group plan for just one or two people. However, there are possible negative tax and legal implications to paying a “stipend” and in light of the new Marketplace small employers may want to use the exchange instead.
Depending on the level of plan you decide to offer and the amount of the total premium you agree to pay for, you may be eligible for a 50% tax credit on your premium expense without increasing your monthly $200 budget.
5. How much of the employee premium do I need to pay for? What is this going to cost me?
In order to be eligible for the small business tax credit you must pay for at least 50% of the monthly premium cost; however you are not required by law to pay a certain percent of the monthly premium. Additionally, the cost to the employee must not equal more than 9.5% of his or her annual salary. For example, if you pay your assistant $40K per year, his or her share of the premium expense cannot exceed $3,800 (It is unlikely that the premium would be this high). The rates will vary by state, and most states have not posted their rates yet. You can assess your costs once the rates are posted on October 1, 2013.
6. Do I have to use the insurance exchanges to purchase group coverage?
No. You are not required to use the Marketplace. And, even if you do use the Marketplace, you can continue to work through your Licensed Insurance Agent as you have always done.
7. Where can I get more information?
Please visit www.healthcare.gov or contact your Licensed Health Insurance Agent.