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 you comply with the law, take advantage of potential tax benefits, and choose the best options for you and your employees.
No requirement to offer health insurance
If you have fewer than 50 full-time equivalent employees, you are not required to offer health insurance, and there is no penalty if you do not offer coverage.
Small business tax credit
If you have fewer than 25 employees and their average wages are less than $50,000, you may be eligible for sliding-scale tax credits if you provide your employees with health insurance.
You may be eligible for grandfathered status if your health plan was in effect on March 23, 2010. If your plan qualifies, you do not have to meet all of the law’s provisions as long as you maintain grandfathered status. Some of the requirements your grandfathered plan may not have to meet include:
- Covering 100 percent of certain preventive services
- Covering the 10 new essential health benefits
- Allowing female employees to see an OB/GYN physician without a referral
- Implementing an internal and external appeals process
If you offer health coverage
If you offer or plan to offer health insurance to your employees and you do not have a grandfathered plan, you will need to select from new plans that provide benefits that comply with the health care law. Your plans would need to comply on your anniversary date beginning in 2014.
Here are some of the key features of the new health plans:
- Plans must cover 10 core services, including doctor visits, maternity care and mental health care. These are called essential health benefits. Below is the entire list:
- Preventive, wellness and disease management services
- 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
- Preventive, wellness and disease management services
- You cannot exclude anyone with pre-existing health conditions.
- Your 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.
- The new health care law creates four benefit categories — called metallic tiers — that are based on how much of the cost is covered by the health insurance company. 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 you to compare products. The “metal” categories are bronze, silver, gold and platinum. 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 your 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.
- The way in which rates are determined will change for small groups. Under the health care law, the highest premium for the older people cannot exceed three times the amount of the lowest premium for the youngest people. Today, a younger and healthier person typically pays much lower premiums, five times less than an older and sicker Pennsylvanian. As a result of this change, younger people in a small group or individual plans will be charged substantially more for their health insurance coverage than they are now, while those who are 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 the employees, whether the employees use tobacco products. and the number of dependents.
- Starting in 2014, you can use a new Web-based shopping option known as the Small Business Health Options Program (SHOP) Marketplace. The SHOP can be administered by either the state or federal government. In Pennsylvania, the SHOP will be run by the federal government. There are two ways you can buy health plans on the SHOP:
- Employer Choice: You can select the specific product(s) from any tier or carrier that you want to offer your employees, and employees can only select from those products.
- Employee Choice: You can select the specific metallic tier you want to offer your employees; the employees are then free to select any product from any carrier that appears within that tier. This option is deferred until 2015.
You are not required to use the SHOP Marketplace. You are free to buy products directly from carriers, such as Independence Blue Cross. You can also use brokers or agents who can help you select products either on or off the SHOP Marketplace. However, you must buy your health plan through the SHOP Marketplace to qualify for the small business tax credit to offset the cost of providing your employees with health insurance.
What should I do?
Do you wonder what kind of tax credit your business might qualify for? Visit the Internal Revenue Service website for more information.
Checklist for small groups
Here are some of the things that are already required or that you may need to do in the future to comply with the new health care law:
- Determine your group size.
- Determine whether your health plan continues to quality for grandfathered status.
- Assess your current offerings. Do they meet the health care law’s actuarial value, affordability and waiting period requirements?
- Identify changes you need to make and implement remedies as needed.
- Address new administrative duties:
- Perform discrimination testing (new for non-grandfathered, fully insured groups) - Date TBD
- Implement higher Medicare Part A payroll taxes for high-wage earners - 2013
- Issue notice of Marketplace to employees - 2013
- Implement health flexible spending account maximum - 2013
- Manage new taxes and fees
- Discontinue any tax deduction for Medicare Part D subsidy amounts - 2013