Are you ready for the exchanges? What does it mean to your business?
Right now, small business owners face a disadvantage when shopping for health insurance for their employees. Because you, as the owner, do not have as many employees as large businesses do, it’s harder for you to get the best prices.
What the Health Law Changes for Small Business Owners
Under the Affordable Health Care Act, small business owners will be able to purchase health insurance for their employees on a special marketplace called “SHOP,” the Small Business Health Options Program. SHOP is run by Covered California, which also runs the new marketplace for individuals and families. The SHOP marketplace is expected to launch this summer.
In SHOP, you will be part of an insurance pool made up of small businesses across California. This is new under the health law. The goal is to give small businesses access to more plans and more buying power, just as large businesses have traditionally had.
If you currently offer health insurance and have a broker you work with, your broker can help you pick a plan on SHOP. If you don’t have a broker, you may seek help navigating SHOP from Covered California if you wish. Insurance Agent Jeff Lecoeuche can help you with this process.
Does the Health Care Law Require That Small Businesses Provide Health Insurance?
No. The Affordable Care Act does not require that businesses with fewer than 50 full-time equivalent employees (defined as 30 hours per week) provide health insurance. But if your business has 50 or more FTE’s, you could be subject to penalties starting in 2015 if you do not provide insurance.
What Businesses Are Eligible for This Tax Credit I Keep Hearing About?
First, the tax credit is available now. If you currently offer health insurance, you can claim the credit on your income tax return if you are eligible.
The major qualifying factor is the size of your business. Only companies with 25 or fewer full-time equivalent employees are eligible. Eligibility is further determined by several other factors including: Your average annual wages are less than $50,000 per full time equivalent employee. You pay at least 50 percent of premiums in tax year 2015. Covered California can help you determine your own eligibility. Tax credits are available for a total of two consecutive years.
If I Decide to Provide Health Insurance to My Employees, How Does Covered California Help Me?
Private health insurance companies will offer plans in SHOP. Covered California is currently developing a standard set of benefits that all plans on the Shop Marketplace will need to offer.
Health plans in Covered California will be offered in “tiers” of coverage: platinum, gold, silver and bronze. The difference between the tears is not what benefits are covered, but the cost of coverage. For example, platinum plans have higher premiums and people pay less when they see the doctor. Bronze plans have much lower premiums, but people pay more when they see the doctor.
Once you pick which tier of coverage you wish to offer your employees, you’ll then decide how much of the premium you will pay, either a specific dollar amount or a percent of the premium. Under the health law, your contribution must be at least 50 percent of the premium’s cost. (To be clear: This minimum threshold is required even if you are not applying for tax credit.) Your employees can then pick any plan within that tier, and they will pay the remainder of the premium.
You will make a single monthly payment to Covered California, which will then handle the premium payments to the specific health plans your employee chooses.
Do I Have to Cover My Employees’ Families, Too?
All of the plans offered in SHOP will be open to spouses and dependents. But you will decide if you wish to offer insurance to your employees only or to your employees and their families. If you decide against covering family members, they can still seek coverage on the individual market offered by Covered California. Dependents may also be eligible for Medi-Cal.
When Does SHOP Open?
SHOP will open on October 1. That’s when you can formally select which tier you want for your employees. Coverage will start January 1, 2014. Covered California has not yet announced specific plans or specific premiums. We should know more about plans and premiums this summer and will update this guide when information comes out.
I will be taking the Exchange cerftification classes in September and will be offering the SHOP plans to my clients and yours starting October 1st, 2013. Call me with any questions at (707) 526-5222.