THE ABCs of ACA for Small Business Owners

According to recent surveys a high percentage of small business owners do not understand the Affordable Care Act (ACA) health insurance mandate.

 

The following is clarification of the ACA mandate for the small business owner:

1. Small groups are NOT mandated to offer or provide coverage.
2. Large groups ARE MANDATED to OFFER coverage to full time employees and dependents (defined as children not spouses) or be subject to a penalty. (often referred to as “Play or Pay”)
3. Individuals must have coverage (the “individual mandate”), unless they are covered through their employer or some other source.  If they do not have coverage, the penalty (to the individual) in 2014 is $95 or 1% of income for each individual.  It will increase in years following. 

Q. What is a Large Group for determining if they must offer coverage?

A.   A Large Group is a company that has 50 or more Full Time Equivalent employees.  Full Time Equivalent means a combination of full time employees (average 30 hours/week) and part time employees. Thus, for example, a group with 30 full time employees and 40 half time employees would equal 50 Full Time Equivalent Employees and would be required to offer coverage.

Q. Must a Large Group employer cover or provide coverage for all employees & dependents?

A. No. The Large Group employer must offer minimum value, affordable coverage to all Full Time employees and their dependents (defined as children not spouses). Offer means that the full time employees are given an opportunity to enroll. Minimum value coverage means that the plan covers at least 60% of medical expenses. Affordable means that the cost of employee only coverage cannot exceed 9.5% of that employee’s W-2 wages. 

Please contact us for more information about Employer Shared Responsibility/Play or Pay.

Surveys also reveal that a majority of small business owners are not able to define the meaning of an Exchange.

(In California the Exchange is called “Covered California”.) 

Q. What is an Exchange?

A. In general, an Exchange is a market place where individuals or small groups can buy health insurance.   Amazon.com and Priceline.com are examples of online exchanges.  The Exchange is an alternative to the traditional private marketplace.  There are two types of Exchanges under Covered California.  The Individual Exchange and the SHOP (Small Group Health Options) Exchange.

Q. Who will sell insurance within the Exchange?

A. Although not yet finalized, some of the insurance carriers, but not all, who sell insurance currently in the private market, will also offer health insurance through Covered California.  Brokers like DBS will be able to present these options as well naturally, so that we can confirm which options are best for your company (inside or outside the exchange).

Q. Will there be savings for small employers in the SHOP Exchange?

A. Rate information is not yet available.  The SHOP Exchange officially opens for enrollments October 1, 2013.

Q. Are small groups required to purchase their insurance through the exchange?

A. No. Small Groups and individuals are not required to go through the Exchange for coverage. They have the right to continue obtaining insurance in the private market as they have prior to the reform law.

Q. Will there be savings for individuals who purchase health insurance through the Exchange?

A.  For those whose income is up to 400% of the Federal Poverty Level (FPL), financial assistance (tax subsidies) may be available when health insurance is purchased through the Exchange.  But the paperwork and burden of proof is going to be significant.  The closer one is to 400% of the FPL, the less the subsidy will be.  (FYI: 400% of the FPL = approximately $45,000 for an individual, and $92,000 for a family of four).