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Small Business Medical Insurance and the Impact of Health Care Reform

Guest post by: Ari Rosenstein

Article Overview: Small business medical insurance is certain to be impacted by the Health Care Reform bill that was signed into law in March 2010. Employers that offer health insurance must be familiar with the law, and how medical insurance for small business plans can be impacted. This article highlights a year-by-review of the upcoming changes.

Small Business Medical Insurance and the Impact of Health Care Reform

The Patient Protection and Affordable Care Act (PPACA), otherwise known as the “Health Care Reform Act” was signed into law on March 23, 2010 by President Obama. Most of the initial provisions did not go into affect for 6 months, or September 23, 2010. The bill is a whopping 2000+ pages long, with a 14-page Table of Contents! It’s no wonder that most employers have little comprehension of what is contained in the bill, and less understanding of how the bill will affect their business. To understand the impact of the bill on your business, you should contact a specialist who is an expert on small business medical insurance plans and is familiar with the Act.

In the meantime, we will take a cursory view of health care reform, and a year-by-year snapshot of changes to come. Hopefully, it will provide a starting part for discussion.

The Act contains five key provisions:

1. The requirement for all US citizens and legal residents to have health insurance;

2. Penalties for employers who do not offer health insurance for their employees;

3. State Based Health Exchanges created to offer cost effective insurance options

4. Premium credits for low income individuals;

5. Eliminates pre-existing condition and annual/lifetime benefit limits

A Year by Year Look at Health Care Reform

Some changes went into effect in 2010, such as coverage for adult dependents (dependents until age 26), and several more will happen in 2011. The most significant changes, however, will not go into effect until 2014. Below is a snapshot of key changes that will be going into effect in the coming years:

2011

· No pre-tax reimbursements from “health accounts” for non-prescribed, over the counter medications,

· 20% tax on nonqualified HSA withdrawals,

· Reporting the value of employer sponsored coverage on w-2’s (delayed)

· Automatic enrollment in long term care program, employer may opt out (delayed),

· Drug company fees: $2.5 billion in 2011, $4.2 billion in 2018

2012

· Uniform explanation of coverage,

· Pre-enrollment document sent explaining benefits and exclusions,

· 60 day notice for material modifications, if not provided in uniform explanation of coverage,

2013

· FSA contributions limited to $2,500,

· New federal employer tax, $2.00 per covered individual per plan year

· Medicare payroll tax increase from 1.45% to 2.35%,

· Employer notice to employees of exchanges, premium subsidies, and free choice vouchers,

2014

· Individual mandate – every citizen must have coverage,

· Individual penalties for not purchasing coverage,

· Guaranteed issue,

· State health exchanges effective

· Standard benefit plans, (bronze, silver, gold, platinum),

· Waiting period not more than 90 days,

· Employer penalties for not offering coverage or at least one FTE receives a tax credit,

· Health insurance company fees: $8 billion 2014, $14.3 billion 2018, 2019 prior year amount increased by premium growth rate.

2018

· Cadillac Tax. 40% tax on plans value in excess of $10,200 single, $27,500 family.

Penalties for Non-Coverage

As stated, most of the act’s important provisions will become effective in 2014. The most relevant law for employers is the penalty they will face for non-coverage of employees. The exact penalties are complicated to calculate, base on numerous factors. Some of the basic guidelines are outlined below:

Employers with more than 50 employees:

· If coverage is not offered by the employer and even one full-time employee (FTE) receives a premium tax credit, the employer will pay a fee of $2,000 per FTE, excluding the first 30 ee’s.

· If “affordable” coverage is not offered and one FTE receives a premium tax credit, the employer will pay the lesser of $3,000 for each employee receiving a tax credit, or $2,000 for each FTE. Affordable coverage is defined as an employee cost of health insurance, less than 9.5% of household income and the actuarial value of plan is at least 60%.

· A Voucher will be required if the employee contribution exceeds 8% of household income.

All Employers:

· Employers that offer coverage are required to provide a free choice voucher to employees with incomes less than 400% of the Family Poverty Level (FPL), whose share of premium exceeds 8% but less than 9.8% of their income and who chose to enroll in a plan in the Exchange.

· A Voucher equals to what the employer would have paid to provide coverage under the employer’s plan. Employers providing free choice vouchers are not subject to penalties.

Employers with 200 or more employees

· Required to automatically enroll employees into health plans offered by employer. Employees may opt out.

If the provisions of the health care reform act sound complex, they are! We highly recommend you consult with a specialist who is an expert on small business medical insurance plans and is familiar with the Act. Feel free to contact CPEhr’s benefits specialist with any health care reform questions.

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Article Tags: health care reform, health insurance for small business, small business medical insurance



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