The Small Business Guide
to Health Care Law
Small Businesses (2-50 employees)
Some key provisions of the Health Care Law affect all businesses. Others apply only to small businesses. Knowing how the Health Care Law affects small businesses will help companies comply with the law, take advantage of potential tax benefits, and choose the best options for the company and its employees.
Here are a few resources to help small businesses prepare for and comply with the Health Care Law’s Employer Mandate and health plan requirements:
- Small business tax credits
- Grandfathered status
- Small business requirements
- New coverage levels
- How small business rates are determined
- Small businesses and the Marketplace
- Checklist for small businesses
Small Business Tax Credits
If a company has fewer than 25 employees and employees’ average wages are less than $50,000, the company may be eligible for sliding-scale tax credits if it provides employees with health insurance.
A company may be eligible for grandfathered status if its health plan was in effect on March 23, 2010. If the plan qualifies, the company does not have to meet all of the law’s provisions as long as it maintains grandfathered status. Some of the requirements a grandfathered plan may not have to meet include:
- Covering 100 percent of certain preventive services
- Covering the ten new Essential Health Benefits
- Allowing female employees to see an OB/GYN physician without a referral
- Implementing an internal and external appeals process
Small Business Requirements
If a company offers health coverage or plans to offer health insurance to employees, and it does not have a grandfathered plan, the company will need to select from new plans that provide benefits that comply with the Health Care Law. Plans would need to comply on the company’s anniversary date beginning in 2014.
Here are some of the key features of the new health plans qualified under the Health Care Law:
- No requirement to offer health insurance. If it has fewer than 50 full-time equivalent employees, a company is not required to offer health insurance, and there is no penalty if it does not offer coverage.
- Health plans must cover ten core services, including doctor visits, maternity care, and mental health care. These are called Essential Health Benefits. Also note that the plan cannot impose annual or lifetime limits on these services. Below is the entire list of Essential Health Benefits:
- Preventive, wellness, and disease management services (tabbed to align with pages)
- Emergency care
- Ambulatory services
- Maternity and newborn services
- Pediatric services, including dental and vision
- Prescription drugs
- Laboratory services
- Mental health and substance abuse services, including behavioral health treatment
- Rehabilitation and habilitative services
- A company cannot exclude anyone with pre-existing health conditions.
- A company’s plan’s out-of-pocket maximum must meet limits established by the Health Care Law. In 2014, the maximum out-of-pocket limits for members enrolled in small group plans are $6,350 for individual plans and $12,700 for family coverage.
New Coverage Levels
The new Health Care Law creates four benefit categories coverage levels called metallic tiers that are based on how much of the cost is covered by the health insurance company. The categories are bronze, silver, gold, and platinum. All carriers will be required to package their product offerings in specific metallic levels that reflect the new acceptable levels of cost-sharing. This will make it easier for employers to compare products. All of these products contain the same core health benefits, like doctor visits, prescription drugs, X-rays, and hospital stays.
The major difference will be in the amount employees must pay in premium and cost-sharing fees. Bronze plans have the highest amount of cost sharing, but lowest level of premium, while platinum plans have the least amount of cost sharing but the highest premiums.
How Small Business Rates are Determined
The way in which rates are determined will change for small groups. Under the Health Care Law, the highest premium for the oldest people cannot exceed three times the amount of the lowest premium for the youngest people. Today, a younger, healthier person typically pays much lower premiums — five times less than an older, sicker Pennsylvanian.
As a result of this change, younger people in small group or individual plans will be charged substantially more for their health insurance coverage than they are now, while older people will pay less. In addition, insurers will no longer be able to base rates on the medical history of employees. The rating factors the Health Care Law allows include geography (where the employer is headquartered), the age of employees, whether employees use tobacco products, and the number of dependents.
Small Businesses and the Marketplace
Starting in 2014, companies can use a new Web-based shopping option known as the Small Business Health Options Program (SHOP) Marketplace. The SHOP Marketplace can be administered by either state or federal government. In Pennsylvania, the SHOP Marketplace will be run by the federal government. There are two ways to buy health plans on the SHOP Marketplace:
- Employer Choice: Select the specific product(s) from any tier or carrier that companies want to offer employees, and employees can only select from those products.
- Employee Choice: Select the specific metallic tier companies want to offer employees; the employees are then free to select any product from any carrier that appears within that tier. This option is deferred until 2015.
Companies are not required to use the SHOP Marketplace. They are free to buy products directly from carriers, such as Independence Blue Cross. They can also use brokers or agents who can help them select products either on or off the SHOP Marketplace. However, they must buy a health plan through the SHOP Marketplace to qualify for the small business tax credit to offset the cost of providing employees with health insurance.
Checklist for Small Businesses
Here are some of the things that are already required or that employers may need to do in the future to comply with the new Health Care Law:
- Determine group size.
- Determine whether the health plan continues to quality for grandfathered status.
- Assess current offerings. Do they meet the Health Care Law’s actuarial value, affordability and waiting period requirements?
- Identify needed changes, and implement remedies as needed.
- Address new administrative duties:
- Perform discrimination testing (new for non-grandfathered, fully insured groups)
- Implement higher Medicare Part A payroll taxes for high-wage earners
- Issue notice of Marketplace to employees
- Implement health flexible spending account maximum
- Manage new taxes and fees
- Discontinue any tax deduction for Medicare Part D subsidy amounts
For More Information
Independence Blue Cross is committed to helping you understand how the Health Care Law affects companies. We’ve written a guide — called The Small Business Guide to Health Care Law — to help you and your business prepare for the changes ahead as some key parts of the law are implemented.