BY ANDY SIEGEL / AJT //
Do you own or work for a ‘small’ business? If so, you may be overwhelmed with all of the information regarding the Affordable Care Act that goes into effect Jan. 1, 2014.
As a small business owner or employee, you have many things to consider in how you choose your health insurance coverage.
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A small business is defined as a business with fewer than 50 full-time equivalent employees. Full time is defined as 30 or more hours worked per week. Small businesses are not required by law to provide health insurance to their employees although many of them would like to do so.
Small businesses can benefit from a group health insurance plan for their employees. Not only do employees appreciate this protection, but businesses can generally tax-deduct 100 percent of their premiums on qualifying group health plans and potentially reduce their payroll taxes.
Employees may pay their portion of their monthly premiums with pre-tax dollars.
Small businesses that provide health insurance for their employees have traditionally paid higher rates than large business, roughly 18 percent higher. This is because a small business plan’s risk was spread over a relatively small pool of insured individuals.
A small number of illnesses or injuries could greatly increase premiums. Plus, the accounts themselves were relatively small. When dealing with insurers, small business owners had very little bargaining power.
If you currently have health insurance through your employer, nothing should change unless the insurance carrier no longer offers your current plan. They will then offer you an alternative option to help you.
If you don’t have employer-based health insurance, there is a new program under the Small Business Health Options Program (SHOP), created by the Affordable Care Act and opening for business on Nov. 1. Small business owners now may have many more affordable options.
The SHOP is a marketplace where small business owners can buy affordable health insurance. Risks are pooled across large numbers of insured individuals, and SHOP has the massive purchasing power to negotiate the best rates with participating insurance companies. The result should be lower-cost options.
Each state has a SHOP marketplace. Just like the marketplaces for individuals, the SHOP exchanges offer four levels of coverage: bronze, silver, gold and platinum. All cover the 10 essential benefits required by ACA, but each has different levels of deductibles and copayments, and different provider network options.
Small businesses that plan to use SHOP must offer coverage to all of their full-time employees (as previously defined) and at least 70 percent of full-time employees must enroll in a SHOP plan.
SHOP vastly simplifies administration of a health insurance program for small businesses.
Employers pay one lump sum to the SHOP, and the SHOP distributes this payment to the various insurers. Small business employers can enroll online, on their own or with the help of an agent, broker or other assistance. Open enrollment is year-round.
SHOP participants with fewer than 25 employees who earn less than an average of $50,000 a year are eligible for an expanded Small Business Healthcare Tax Credit. Beginning in 2014, the tax credit is available only through SHOP.
This tax credit covers as much as 50 percent of the employer contribution toward premium costs for eligible employers with low-to-moderate wage workers. It is good for two years. Employers can still deduct from taxes the portion of premium costs not covered by the tax credit.
There are 4 categories of plans in the SHOP Marketplace. They offer similar benefits, but differ based on how enrollees and the plan share the costs of care.
In 2014, SHOP is open to employers with 50 or fewer full-time equivalent (FTE) employees.
When you compare plans for your business, you’ll notice that the plans are put into categories: bronze, silver, gold & platinum. The categories describe the way your employees and the plan can expect to share costs for health care.
The category has nothing to do with the quality of care a plan provides. All plans offered through the SHOP must provide a set of essential health benefits. What you can expect to pay for things like deductibles, copayments and out of pocket expenses depend on which plan category you choose.
As with all health plans, you and your employees have to pay a monthly premium. You can decide up front exactly how much you can afford to contribute towards your employees’ premium costs, so you have more control over your company’s health coverage spending.
When comparing plans, just as important as the premium cost is how much your employees have to pay out of pocket for covered services. The plan with the lowest premium may not provide you or your employees with the best overall value.
There is a direct relationship to premiums and out of pocket costs. Premiums are usually lower for plans that pay a smaller share of medical costs when you get care. For example, with a Bronze plan, your employees will probably pay a lower premium than they would for a Gold plan. But they’ll probably pay more when they go to the doctor.
Platinum plans generally have the highest monthly premiums and lowest out-of-pocket costs for services. They will likely provide better financial protection if you use a lot of services or have a major health crisis.
In general, when choosing health coverage for your business, keep this in mind: The lower the premium, the higher the out-of-pocket costs. The higher the premium, the lower the out-of-pocket costs.
This year promises to be an interesting one, to say the least, with all of the changes in our healthcare system. With the goal of everyone having health insurance, this small business program is a critical component to allowing this to occur.
About the writer
Andy Siegel, a native of Atlanta and graduate of the University of Georgia, is the president of Siegel Insurance Inc. and vice president of Independent Insurance Agents of Georgia.