After years of debate, controversy, delays and attempts to overturn the law, the Affordable Care Act is close to full implementation.
Small businesses and individuals can start signing up for health care coverage using the Small Business Health Options Program, or SHOP, on Oct. 1. That coverage will go into effect Jan. 1, and yet many small-business owners have questions about the ACA and what it will mean for their companies.
The state has authorized and set up Connect for Health Colorado, a virtual insurance market that will allow people to shop for insurance. Anyone wanting to take advantage of the federal government subsidies for premiums must purchase insurance through the exchange — including small businesses.
Products in the exchange must meet certain federal guidelines for minimal coverage. Mental health coverage, dental coverage and basic preventive services are included.
What is the SHOP marketplace?
SHOP is intended to make it easier to buy health insurance for small businesses with fewer than 50 full-time-equivalent employees.
Under SHOP, a business can control the coverage offered and how much it will pay toward employee premiums; plans can be compared on an apples-to-apples basis; some small businesses qualify for tax credits of up to 50 percent of premium costs. And businesses still can deduct the rest of premium costs not covered by the tax credit from its annual tax bill. The credit is available only for plans purchased through SHOP.
Businesses can apply online or use an agent or insurance broker for coverage beginning on Jan. 1. Starting in 2014, only small businesses with 50 or fewer full-time employees are eligible, but in 2016, businesses with 100 FTEs can apply for insurance through SHOP.
Coverage must be offered to every employee who works full-time, under the federal rules, which considers full-time as anyone working 30 hours or more a week.
How do I know if the business will receive a tax credit?
Small businesses with fewer than 25 full-time employees who earn about $50,000 a year or less are eligible for the credit. Businesses must pay at least 50 percent of premium costs, but are not required to offer coverage to part-time workers or any family members.
Nonprofit organizations receive a 35 percent tax credit and only businesses purchasing through the SHOP marketplace are eligible.
Tax credits are highest for companies with fewer than 10 employees who earn an average of $25,000 or less. The smaller the business, the bigger the credit.
What if my business has more than 50 full-time employees?
Businesses with more than 50 employees are “large businesses,” according to the Affordable Care Act. Large businesses cannot use the SHOP marketplace until 2016, and then only if they have up to 100 employees.
And the large businesses could be subject to the Employer Shared Responsibility Payment for 2015, a payment made by businesses with more than 50 employees that meet certain criteria. For example, if at least one of the full-time employees receives lower costs on premiums through the marketplace then companies must pay a penalty.
The Employer Shared Responsibility Payment applies to some large employers who don’t offer insurance that meets certain minimum standards. For instance, if an employee’s share of premiums is more than 9.5 percent of his or her yearly household income, the coverage isn’t affordable. Companies can avoid the payment if the employee’s share doesn’t exceed 9.5 percent of their wages for the year. A health plan meets the “minimum value” requirement if the plan’s share of the total costs of covered services is at least 60 percent.
How much is the Employer Shared Responsibility Payment?
It depends. The amount of the payment is based on whether the business offers health insurance. Businesses that do not offer insurance must pay $2,000 for every full-time employee, excluding the first 30 employees.
Businesses that offer insurance that doesn’t meet the minimum requirements will pay $3,000 for every employee who qualifies for premium savings in the marketplace.
These payments are not tax-deductible.
What if my business already offers health insurance to employees?
Businesses that already offer health insurance can keep the coverage they currently offer. However, those with 50 or fewer full-time workers can offer a plan via the marketplace instead. Health credits are only available to businesses who receive coverage through SHOP.
Employees can buy health insurance through the marketplace, but if their business coverage is considered both affordable and meets minimum value, they will not be eligible for federal subsidies, and the business will not have to pay the Employer Shared Responsibility Payment.
What should businesses tell employees about the marketplace?
Companies covered by the Fair Labor Standards Act must provide a written notice to employees before Oct. 1. The notice should include information about the marketplace. If employees might be able to get lower costs on insurance by using the SHOP marketplace and if they buy insurance through the marketplace, they’ll lose the employer contribution to their health benefits.
How do employees sign up for SHOP?
Once an employer chooses SHOP coverage, employees can sign up for it online through the marketplace. There are tools to help create an employee roster and set up an email distribution list notifying employees about the coverage.
Employees must verify personal information and review the plan. Employees can see how much they will pay every month, their deductible and their out-of-pocket costs.
If they accept the plan, then the company owner must approve the plan and calculate total costs. Employees can also purchase individual insurance if they want. Companies do not have to pay the premiums for those employees.
What if I’m self-employed?
People who are self-employed with no employees can use the individual marketplace for insurance coverage.
The federal government considers a person self-employed if he or she runs an income-generating business but has no other employees. Independent contractors do not count as employees, under federal guidelines.
And there are new options under the ACA. Starting Oct. 1, people who are self-employed can go to Connect for Health Colorado to compare features of plans, determine premiums, deductibles and out- of-pocket costs before enrolling. No one is denied coverage based on pre-existing health conditions.
People with individual insurance policies might be able to switch to a marketplace plan. Based on annual income, the monthly premiums could be lower. (Source: healthcare.gov)
Sources for more information