Small employer FAQ on the Affordable Care Act

Small employers may not be required to offer their employees health care coverage under the Affordable Care Act (ACA), but some may find it easier to offer coverage than in the past via new plan options and federal subsidies.

As of Oct. 1, small employers can browse coverage options through the state”™s health insurance exchange, Access Health CT, and apply for a federal subsidy to lower the cost of providing coverage.

Nationally, the ACA faced another vote in the House of Representatives Jan. 10. Dozens of previous “defund” bills have already passed the House with no legislative results; this one asks for greater scrutiny of the health website. Meantime, those who have signed up now number multiple millions.

Given the ACA”™s rocky rollout and the antagonism toward it, many business owners have questions about how the system works and who can qualify for a subsidy, said Penny Boyd, an employee benefits expert at CBP, a Stamford consulting firm. To address small businesses”™ most frequently asked questions about the health exchange, Boyd supplied the following responses.

What are the criteria for a business to get a federal subsidy?

“A small business tax credit is available to companies that purchase health insurance on the Small Business Health Options Program, or SHOP marketplace, through Access Health CT.

“To get a subsidy, here are a few criteria an employer must meet:

· An employer must have 25 or fewer full-time equivalent employees. Depending on the type of business entity, this may not include the owners of a small business.

· The average wage paid to employees must be less than $50,000.

· The employer must pay at least 50 percent of each employee”™s insurance premium.

· The smaller the employer and the lower the average wage, the greater the tax credit will be.”

How does the SHOP Marketplace work for a small business?

“Beginning in 2014 the state SHOP marketplace plans will be available to businesses with 50 or fewer employees. Some states, such as Connecticut, New York and Massachusetts, have chosen to run their own SHOP marketplace. States like New Jersey have opted to let the federal government run the state SHOP marketplace.

“In the Connecticut Choice Model at AccessHealthCT, employers can choose between “flexible choice” plans at no additional cost. The plans require a 75 percent participation rate and there are three models employers can select:

· Vertical choice ”” employees can choose from three levels of coverage from one selected carrier

· Horizontal choice ”” employees can choose a carrier across one level of coverage, selected by the employer.

· Single choice ”” one plan from one carrier is available for employees.”

When must large employers (those with 50 or more fulltime equivalents) begin offering medical coverage to employees working 30 hours per week ”” was it effective Jan. 1or upon renewal?

“The IRS announcement in Notice 2013-45 (July 2013) delayed only the employer penalty until Jan. 1, 2015. The penalty delay resulted from a delay in reporting requirements to the IRS. Technically, the ACA requires plan and eligibility changes to be made on the previously required time table which is the first plan anniversary date in 2014.

“The delay in reporting requirements has no effect on the effective date of other Affordable Care Act provisions. At this time, the extension of employer penalty given to non-calendar year plans was not included in the IRS notice. This suggests that the penalty may be imposed on all plans on Jan. 1, 2015, regardless of plan anniversary date.”

How would the employer mandate be enforced?

“Employers will have to provide proof of coverage and employee contributions when filing their tax returns. Employers will be required to make an affirmative election that they will provide health insurance coverage and to disclose that information to employees. Any penalties that might be assessed would be paid to the IRS. Employers may appeal the assessment of any penalty; therefore good recordkeeping is a must.”

What are the main fees going into effect for 2014 that are adding to the cost of premiums for employers?

“Insured plans will be subject to a number of fees ”” listed below ”” that will be paid by insurance companies. The insurance companies have and will continue to build these fees into the insurance premiums. Self-insured plans are responsible for paying the fees themselves.

· Reinsurance fee: A three year program designed to offset the cost of insuring high-cost patients in the individual market. The fee is estimated at $63 per year for each covered person in the plan. A proposed reduction was made for 2015.

· Health insurance tax: A permanent annual tax that will be used to offset cost associated with the Affordable Care Act. This tax is expected to be about 2 percent in 2014 and to increase each year.

· PECORI fee: The small fee will be assessed through plan year 2019 and insured plans will be paid by the insurance carriers. The fee will be used to fund the Patient Centered Outcome Research Institute.”

What are private exchanges and how are they different from the public exchanges or marketplaces?

“Private exchanges are exactly that ”” private exchanges operated by private entities. The state and federal governments have nothing to do with these, and because of that, the private exchanges do not make available subsidies. The only way for an individual to get a subsidy is by purchasing coverage through the state or federal marketplace. Private exchanges are for employers that want to switch from a defined benefit model to a defined contribution model.”