Small Businesses Face Changes

The Affordable Care Act (ACA) will mean significant changes for small businesses and their employees. A brief from The Henry J. Kaiser Family Foundation, Focus on Healthcare Reform, January 2012, explains the changes in the ACA that will have the biggest implications for small-business owners and when those changes are likely to take effect. The ACA will alter the health insurance landscape for small-business owners by making several changes to the insurance market, creating insurance exchanges, and enforcing penalties for those businesses with ≥50 employees that do not offer affordable coverage to their employees. Small businesses will be able to keep their existing insurance plans if they choose to, as long as the company already had the health plan in place before March 23, 2010. Under the ACA, these plans can be “grandfathered” once the ACA goes into effect. Small businesses that want to have a grandfathered plan will be able to change insurance carriers as long as the benefits and costs to employees stay about the same; however, they cannot make significant changes to their coverage, such as cuts to benefits. Under the ACA, grandfathered plans will not have to meet several of the act’s requirements, including covering preventive services without cost sharing, covering essential health benefits, providing an internal and external appeals process for contesting coverage decisions, or allowing access to obstetrics and gynecology services without a referral. When the ACA goes into effect in 2014, all insurance plans will have to guarantee plan availability and renewal to everyone regardless of their health status, and people <26 years of age will be allowed to remain on their parent’s health plan. In addition, new plans that are not grandfathered will be prevented from varying premiums based on health status. They will also be required to cover a minimum set of benefits based on state-determined benefit packages. No plans, whether grandfathered or new, will be able to exclude coverage based on preexisting conditions. A new insurance market, the Small Business Health Options Program (SHOP Exchange), will give small businesses another option for purchasing healthcare coverage. All states will be required to offer an exchange by 2014; however, each state will be given the option to decide whether small businesses eligible for exchange enrollment will be defined as 1 to 50 employees or 1 to 100 full-time equivalent (FTE) employees until 2016, when all businesses with ≤100 FTE employees will be eligible to use the exchanges. Those businesses with >51 employees will be fined $2000 per employee, excluding the first 30 employees, if they fail to offer affordable healthcare coverage to employees who work an average of ≥30 hours a week beginning in 2014. To meet affordability standards, employers need to offer plans that cover at least 60% of the actuarial value of the cost of benefits and must not exceed 9.5% of employees’ household incomes. If the health plans are not considered affordable, employees may be eligible for tax credits to purchase health insurance through the exchange or on their own, and employers will either have to pay $3000 per employee receiving the credit or the $2000 penalty per employee excluding the first 30 workers, depending on whichever option is less.