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Small Business Employee Benefits and HR Blog

Health Care Reform "For Dummies" - Small Business Edition

April 29, 2014
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Health Care Reform has dramatically changed the health benefits landscape for small business owners. New options are available and small businesses are re-evaluating their health benefits strategy... especially if health benefits were out of the question in the past. At the same time, many small business owners are unsure how Health Care Reform impacts them. Here are key highlights for small business owners on the Affordable Care Act -- a Health Care Reform "for Dummies".Health_Care_Reform_For_Dummies_-_small_biz

What has Changed for Small Business?

Many of the major changes associated with Health Care Reform are being implemented in 2014. Whether or not these changes impact you depends on the type of health coverage you offer (if any). Here are some of the relevant changes affecting small businesses:

  • Guaranteed-Issue Coverage: As of 2014, insurance companies can no longer deny coverage based on health conditions. Now, everyone who applies will be covered regardless of pre-existing conditions. This is especially relevant for small businesses whose employees purchase individual health insurance.

  • Waiting Periods: If you offer health benefits, the waiting period for otherwise eligible employees cannot be longer than 90-days. 

  • Preventive Care: Insurance plans compliant with the ACA are required to cover all preventive care at no cost. This includes a yearly “wellness visit”.

  • Dependency Coverage: Insurance plans compliant with the ACA are required to offer coverage to dependents age 26 years old and younger.

  • ACA Premium Tax Credits: Many individuals now qualify for premium tax credits when purchasing individual health insurance. Again, this is especially relevant for small businesses whose employees purchase individual health insurance.

  • New Reporting Rules: As part of the ACA, employers (with 250 or more W-2 Form employees) are required to report the cost of health benefits coverage under an employer-sponsored group health plan on their W2s. 

Unsure which reforms affect your small business? Download this PDF Health Care Reform Checklist.

Do I Have to Offer Coverage?

No business has to offer coverage. However, some larger businesses may pay an Employer Shared Responsibility Fee if they don't. Here's what small business owners need to know.

  • The ACA requires employers with 50 or more employees to either offer health insurance coverage to full time employees, or be subject to a fee.

  • However, this requirement has been delayed and will be phased in for employers as follows: Employers with 100 or more employees will be subject to the "employer mandate" provision in 2015. Employers with 50-99 employees are not subject to the employer mandate until 2016. 

  • Employers with fewer than 50 employees are not subject to the employer mandate, nor to the fees.

What Happens to My Employees if I Don’t Offer Coverage?

If employees of a small business are not provided health insurance coverage at work, they are not out of luck. But, they do need to be aware that:

  • All individuals are required to be covered by a minimum level of insurance, or they will likely pay a penalty at tax time. This penalty starts in 2014 and increases each year.

  • Employees are able to purchase individual coverage on the new Health Insurance Exchanges or directly from a broker or insurance company. Since these employees are not offered coverage from their employer, they can also access the premium tax credits if they're eligible (based on income). For many employees, not being offered health insurance coverage at work saves them money on the same or better coverage. And because of these advantages, many businesses are sending employees to the exchanges.

Health Benefit Options for Small Business Owners

Small business owners are often surprised to find better options for offering benefits outside of traditional group health insurance plans. For example:

  • Small businesses can offer a defined contribution plan that provides full or partial reimbursement for individual plans. This can be done by implementing a Section 105 Reimbursement Plan.

  • Small businesses can explore options, and tax credits, available through their state's small business SHOP Marketplace.

If you're a small business owner, what questions do you have about Health Care Reform? Leave us a comment.

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