Small Business and Obamacare FAQ: Health Care Insurance Exchanges
By Anne Manners
Under the Patient Protection and Affordable Care Act — also known as PPACA, or popularly as Obamacare — the first open enrollment period is approaching quickly. The convergence of small business and Obamacare has been a hot topic since the law’s passage and business owners continue to experience confusion over it. Gallagher Benefit Services has written an extensive Obamacare FAQ that addresses common questions along with more obscure ones. This is the first in a four-part series where we will summarize key elements of the FAQ with a focus on the intersection between small business and Obamacare.
What is an Affordable Insurance Exchange?
This fall, small businesses will have the option to enroll employees in Affordable Insurance Exchanges, with coverage beginning in January 2014. Learning about the exchanges is a key part of understanding the PPACA and is especially important for small businesses with one to 100 employees. Now is the time for small businesses to look into the exchanges, compliance, and how to let employees know about the upcoming changes to health-insurance options.
An Affordable Insurance Exchange is an arrangement where individuals and companies can purchase private health insurance. Under the PPACA, each state must set up an exchange where private and nonprofit insurers offer the ability to purchase health insurance. The act calls for exchanges to be open to small employers — those with up to 50 employees, and in some states up to 100 — in 2014, and progressively larger employers through 2017. Through these exchanges, businesses will be able to compare coverage options and prices for different plans.
The insurance exchanges themselves may be established as nonprofit organizations or government agencies. States may also set up regional insurance exchanges that work together to provide the coverage required under the law. Exchanges make it possible for individuals and smaller businesses to choose a plan that works best for them. They level the playing field, making it easy for smaller employers to provide coverage for their employees at an affordable price by pooling costs and risks associated with health care coverage.
What Will Insurance Exchanges Offer?
Coverage options will vary from state to state, and many states have not finished setting up their exchanges. Part of the uncertainty about the PPACA stems from the fact that many specifics about coverage still haven’t been established and won’t be for some time. Generally speaking, however, exchanges are likely to offer four different levels of coverage, plus a catastrophic plan.
- Bronze plans will provide essential health benefits covering 60 percent of the plan’s benefit cost, with an out-of-pocket limit equal to the Health Savings Account — or HSA — current legal limit. In 2010, that was $5,950 for individuals and $11,900 for families.
- Silver plans will cover 70 percent of the plan benefit costs, with HSA limits.
- Gold plans will cover 80 percent of the plan benefit costs, with HSA limits.
- Platinum plans will cover 90 percent of the plan benefit costs, with HSA limits.
- Catastrophic plans will be available to individuals up to age 30, or those exempt from the mandate to purchase coverage. These plans provides catastrophic coverage only, with the coverage level set at the current High Deductible Health Plan levels except that preventive benefits and coverage for three primary care visits would be exempt from the deductible.
What are Small Businesses Required to Do?
Starting in 2014, small businesses with at least 50 full-time employees must provide them with health insurance or pay a penalty (that number rises to 100 full-time employees in 2017). One concern many small businesses have is that they will be required to use the exchanges. They are not; the exchanges will simply provide another option for employers to find a health insurance plan that works best for them. Also, small businesses may be eligible for tax credits to help them pay for their employees’ health insurance through the exchange.
Starting in late summer or fall of this year, employers will be required to provide a written notice to each employee and new hire outlining the existence of these exchanges, the services provided through them, and contact information for the exchange. The notice must also include information about possible tax credits and loss of employer contributions (if any) for employees purchasing a qualified plan through the exchange. This notice was originally due to be provided to employees by March 1, but has been pushed back to coincide with the first open enrollment period for the insurance exchanges.
Now is the time for small businesses to be looking into insurance exchanges and learning about the options available to them, as well as the requirements they will be expected to meet. As more states establish their exchanges, small businesses will need to ensure they are keeping up with any mandates that may apply.
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