Many Americans, including small business owners, are still confused about how the Affordable Care Act (aka ACA or ObamaCare) impacts them. As such, health insurance brokers and agents are becoming a go-to resource on health reform for small businesses.
Here are ten common questions small business clients have about the ACA.
10 Affordable Care Act Questions Your Small Business Clients are Asking
No business "has" to offer health insurance to employees. However, if larger a business does not offer a minimum level of coverage to full time employees, they may pay a fine. The fines start in 2015 for businesses with over 100 full-time-equivalent (FTE) employees, and not until 2016 for businesses with 50-99 FTE employees.
2. How do we calculate our number of FTEs?
To help a client determine if they are subject to the Employer Shared Responsibility Fee (aka Employer Mandate), they will need to determine their number of FTEs.
Generally, a full-time employee is defined as working on average at least 30 hours per week in a given month. However, for purposes of determining whether a company is an applicable large employer, the employer must include all full-time employees plus the full-time equivalent of its part-time employees.
To calculate the full-time equivalent of part-time employees, add the number of hours worked by part-time employees and divide the total by 120. The sum of the full-time employees and the full-time equivalent of the part-time employees is the number used to determine whether a company is an applicable large employer.
3. How does the ACA change small group health plans?
Clients who offer a fully-insured small group health plan are seeing an impact on their health coverage in two primary ways. First, new taxes and fees are, on average, increasing premium rates. Second, new plan and coverage requirements are impacting plan design, plan benefits, and cost.
4. Will small group health plans be more expensive in 2014 and 2015?
It really depends on the business, their current coverage, and their employee demographics. However on average, most small businesses are expected to higher premium costs starting with their 2014 plan renewal date.
5. Is there financial assistance if we decide to continue offering group health insurance?
Small businesses who do offer group health insurance may be eligible for the Small Business Health Care Tax Credit. To be eligible for the tax credit, employers must meet these three criteria:
- Be an employer with fewer than 25 full-time equivalent (FTE) employees, and
- Pay an average wage of less than $50,000 a year per employee, and
- Pay at least half (50%) of employee health insurance premiums (for full-time employees only)
6. What other options are there besides a group health insurance plan?
Small businesses are rapidly adopting a new health insurance alternative called "Pure" Defined Contribution Health Benefits. With this approach, small businesses are dropping group health insurance and setting up a plan to reimburse employees for the cost of individual health insurance policies.
Small businesses should work with their broker and a Defined Contribution provider to set up a tax-free, compliant reimbursement plan -- as these types of programs must comply with various federal regulations, including the ACA's new Market Reforms.
7. If our business does not offer health insurance, are my employees required to buy coverage and is there any government help?
Yes. As of January 1, 2014, all individuals must purchase "qualified" health insurance. If they do not, they may be subject to a tax penalty of either $95 or 1% of household income (for a single person), whichever is greater.
Most employees will be eligible for health insurance tax subsidies. These significant discounts are available to individuals with incomes up to 400% of the poverty line (~95,000 for a family of four in 2014) to help pay for individual health insurance.
8. Our employees qualify for the health insurance tax subsidies. How can we make sure they have access to them?
Small businesses can give employees access to the health insurance tax subsidies by not offering group health insurance.
9. When can employees sign up for individual health insurance coverage?
Employees can sign up for individual health insurance coverage during the annual open enrollment period, or during a special enrollment period if they have a qualifying life event.
The next open enrollment period is November 15, 2014 to February 15, 2015.
Employees qualify for a special enrollment period if the company drops group health coverage or if they have another triggering event such as a marriage, birth of a child, permanently move to a different area, or if their income changes significantly.
10. How does health care reform impact my health insurance if I am self-employed?
As of 2014, self-employed individuals will have access to the small group market and guaranteed-issue individual health insurance policies. Self-employed individuals are still able to take tax deductions for premiums on their individual 1040.
If you are a health insurance broker, what ACA questions are you hearing from small business clients?