Will my business be required to provide employee health insurance under the health care law?
The law does not mandate employers provide employees health care coverage. However, larger employers (more than 50 workers) will face fees if they do not provide coverage or provide coverage that is not affordable. In some cases, larger employers that provide coverage may also face penalties if the plan does not cover at least 60 percent of the cost of covered services or if the premium exceeds 9.5 percent of the employee’s income.
Health insurance plans will provide documents to people they insure that will be used to prove that they have the minimum coverage required by law.
What are the fees for not offering coverage?
See this page for more on the employer responsibility provisions of the law and fees for not offering affordable coverage.
My company already offers employee health coverage, how does the law impact me?
Plans in existence on the date of enactment of the health care law on March 23, 2010, also known as Grandfathered Plans, are exempt from some, but not all, of the new insurance market reform requirements. In order to maintain its grandfathered status, a plan cannot reduce or eliminate benefits to treat particular conditions, increase employee cost-sharing (including deductibles, co-insurance, and co-payments) above certain thresholds, reduce the employer share of the premium cost, or change insurers. Once a plan loses its grandfathered status, it will have to comply with all the new rules.
Changes to a grandfathered plan that will cause your plan to lose its grandfathered status include:
Loss of all membership in the plan
Elimination of all or a majority of all benefits to diagnose or treat a particular condition
Adding an overall annual limit on the dollar value of benefits to a plan that had no overall annual or lifetime limits on March 23, 2010
Adding an overall annual limit on the dollar value of benefits which is lower than the dollar value of the lifetime limits that were in effect on March 23, 2010
Decreasing the dollar value of an overall annual limit below the level in effect on March 23, 2010
Changes to a grandfathered plan that will NOT cause your plan to lose its grandfathered status include:
Changes to premiums, as long as the overall percentage contributed by the employer remains the same or higher than what was in effect on March 23, 2010
Changes made to comply with federal or state legal requirements
Changes made voluntarily to comply with the Affordable Care Act (ACA)
Changes made voluntarily to increase benefits
Changing third party administrators
Adding family members to existing coverage
Adding new employees (whether newly hired or newly enrolled) and their families to existing plan
Employees switching from one grandfathered plan option to another grandfathered plan option offered by the employer (for example, from HMO to PPO)
An individual or group changing carriers
How does the law affect me as a small business?
On average, small businesses pay about 18 percent more than large firms for the same health insurance policy. Small businesses also lack the purchasing power that larger employers have. The health care law includes cost saving provisions to keep premiums low and improve quality. These include tax credits and an affordable insurance marketplace, also known as Covered California.
If you have fewer than 25 Employees:
Beginning in 2010, business with fewer than 25 full-time equivalent employees and average annual earnings wages of less than $50,000 that pay at least half of the cost of health coverage for employees are eligible for a federal tax credit.
If you have fewer than 50 Employees:
Businesses with fewer than 50 employees are exempt from fees faced by larger employers that do not offer coverage. But, small businesses with fewer than 50 employees will be eligible to purchase coverage through Covered California’s Small Business Health Options Program (SHOP) during open enrollment in the fall of 2013.
If you have 50-199 Employees:
Small businesses with more than 50 full time employees will be assessed fees for failing to offer affordable health coverage to employees beginning in 2015. In the future, Small businesses with 50-99 employees may be able to purchase coverage through Covered California’s Small Business Health Options Program (SHOP) and in 2017, states will have the option to allow businesses with more than 100 employees to purchase coverage through the SHOP.
How much is the tax credit?
To help offset the costs of covering employees, there is a sliding-scale tax credit of up to 35 percent of the employer’s eligible premium expenses for tax years 2010–2013. Employers with 10 or fewer full-time employees, paying annual average wages of $25,000 or less, and pay for at least 50 percent or more of employee premium costs qualify for the maximum credit – 35 percent.
Beginning in 2014, the maximum tax credit increases to 50 percent of premium expenses but coverage must be purchased from Covered California and will only be available for two consecutive years.
How do I find out if my business is eligible for the health care tax credit?
The law includes a small business health care tax credit to help make employee health care coverage more affordable for small employers to encourage companies and organizations to either maintain existing coverage or offer health insurance to their employees for the first time. Small employers are eligible for the health care tax credit if they employ fewer than 25 full-time equivalent employees, pay employees an average of less than $50,000 per year, and pay at least 50 percent or more of employee premium costs. (Full-time equivalent is the number of employees on full-time schedules plus the number of employees on part-time schedules, converted to a full-time basis.)
The tax credit will be introduced in two phases. For tax years 2010 to 2013, eligible employers may receive a tax credit of up to 35% of the employer’s contribution toward the employee’s health insurance premium. For tax years 2014 and later, eligible small businesses that purchase coverage through the Covered California may receive a tax credit of up to 50% of your contribution toward the employee’s health insurance premium. Employers are eligible to take the tax credit for two years. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium for tax years 2010 to 2013, and up to 35% for tax years 2014 and later.
What if my small business doesn’t offer insurance today, but I choose to start offering insurance. Will I be eligible for the health care tax credits?
Yes. The tax credit is designed to both support those small businesses that provide coverage today, as well as those that newly offer such coverage.
What is Covered California?
Established under the health care law, Covered California is a new, state-run insurance marketplace that will create a more organized and competitive market for buying health insurance. Beginning in 2014, individuals and businesses with fewer than 50 employees will be able to purchase health coverage through this marketplace. It aims to provide relief to small businesses that cannot afford small group health insurance.
Covered California will make it simple and affordable for you to purchase high-quality health insurance and access financial assistance to pay for coverage. You can shop online, over the phone or in person to find the right health care insurance option for you.
Both individuals and small businesses will be able compare different health insurance plans and learn employers with fewer than 25 full-time workers will be able to find out if they qualify for the small business tax credit to help cover the cost of providing health coverage to employees.
As a small business, how will Covered California benefit me?
Covered California aims to allow small businesses to compare health plans, get answers to questions, find out if they are eligible for tax credits for private insurance or health programs, and enroll in a health plan that meets their needs. It will also level the playing field, offering better choices at lower costs, similar to the purchasing power larger employers enjoy, which can keep the cost of insurance down.
When can I begin purchasing coverage through Covered California?
In the event of a life-changing event such as the loss of a job, death of a spouse or birth of a child, you will be eligible for special enrollment within 60 days of the event, otherwise, the next open-enrollment period will begin in November 2014 for coverage in 2015.
What kind of health insurance will be offered through Covered California?
Covered California will offer certified insurance products that provide Essential Health Benefits, follow established limits on cost-sharing and meet other requirements. Known as Qualified Health Plans, these plans are guaranteed to provide essential levels of coverage and consumer protections required by the health care law. These plans will be offered in categories based on the percentage of covered expenses paid by the health plan and will be the same products at the same price whether they are offered through Covered California or in the open market.
In addition to these traditional health plans, Covered California will offer what is called “catastrophic coverage,” which will help protect a person from financial disaster in the event of a serious and expensive medical emergency. Catastrophic coverage is not designed for day-to-day medical expense such as doctor visits, prescription medicines or even emergency room visits. It is designed to cover excessive medical bills that occur above the limit that you would be able to manage financially. Covered California will provide catastrophic coverage those up to age 30, or those individuals who can provide a certification that they are without affordable coverage or are experiencing hardship.
How will Covered California make it easier to compare different plans?
There will be four basic levels of coverage: Platinum, Gold, Silver and Bronze. This ranking system will make it easy to compare different health plans. As the metal category increases in value, so does the percent of medical expenses that a health plan will cover. These expenses are usually incurred at the time of health care services – when you visit the doctor or the emergency room, for example. The health plans that cover more of your medical expenses usually have a higher monthly payment but you will pay less whenever you receive medical care.
You can choose to pay a higher monthly cost so that when you need medical care, you pay less. Or you can choose to pay a lower monthly cost so that when you need medical care, you pay more. You can choose the level of coverage that best meets your health needs and budget.
How much will it cost to purchase health insurance through Covered California?
The cost of health insurance depends on the coverage you choose to purchase and whether you qualify for tax credits to help offset the cost of providing coverage.
What does the new law offer to help me keep my employees healthy and productive?
The health care law has several provisions focused on prevention and wellness in an effort to promote healthy living for your employees. The law requires insurance companies provide important preventive services — which can help to keep your employees healthy and productive — at no additional cost. A complete list of all preventative services covered under the health care law is available here.
How does the health and wellness of my employees affect me as a business owner?
The indirect costs of poor health—including absenteeism, disability, and reduced work output—may be several times higher than direct medical costs. Productivity losses related to personal and family health problems cost U.S. employers $1,685 per employee per year, or $225.8 billion annually.
More importantly, workplace health programs have the potential to promote healthy behaviors; improve employees’ health knowledge and skills; help employees get necessary health screenings, immunizations, and follow-up care; and reduce their on-the-job exposure to substances and hazards that can cause diseases and injury.
Our company is small. We want to do more to help employees improve health and wellness but can’t afford the cost. How will the law help me?
Several provisions of the health care law are designed to help small business improve workforce wellness and even help to provide incentives for employees who achieve health goals.
HHS will also support workplace wellness programs using funding from the Prevention and Public Health Fund. Wellness grants – a total of $200 million over five years – are available to businesses with fewer than 100 employees who work 25 hours or more per week. They will be available to businesses that did not have a wellness program in place when the law went into effect on March 23, 2010.
Sources: Covered California, Internal Revenue Service, U.S. Department of Health & Human Services