As a small business, there are certain aspects of health reform (aka the Affordable Care Act or ObamaCare) that impact you and your employees. Here are eight key questions, and answers, about health reform that all small businesses need to know.
Q: What are the New Exchanges?
A: The Health Insurance Exchanges ("Marketplaces") are new websites where employees can go to compare and enroll in health insurance plans.
Q: Who Runs the Exchanges?
A: It depends on the state. Sixteen states are running their own Exchange and have their own website (ex: wahealthplanfinder.org). Thirty-four states are running their Exchange through the Federal government (or partnering with the Federal government) and use the website healthcare.gov. Look up your state Exchange website here.
Q: Who is Using the Exchanges?
A: The Exchanges are open to people under age 65 who are currently uninsured, buy coverage on their own (called "individual health insurance"), and employees of small businesses with 50 or fewer employees whose employer has decided to use the Exchange.
For those buying individual health insurance on the Exchanges, subsidies are available on a sliding scale to help lower the cost of healthcare. Those making up to four times the federal poverty level are eligible. This translates to an individual earning up to $45,960 in 2013 and a family of four earning up to $94,200 in 2013. The subsidies cap the cost of health insurance between 2% and 9.5% of your annual income, depending on how much money your family makes. Read more about how employees can get free health insurance subsidies here.
Q: How will Employees Know About the Exchanges?
A: Most employees will hear about the Exchanges in a couple ways. First, employees will hear about it from work. All employers were to give written notice to employees about coverage options under the Exchanges by October 1. (Exchange notice requirements here). The Exchanges are also doing extensive marketing and outreach campaigns to educate the public about the Exchanges, so employees will hear about them via social media, word of mouth, and the news.
Q: Do Employees Have to Buy Insurance?
A: Yes, or pay a tax penalty (an "individual shared responsibility payment"). The law requires that most Americans be insured starting January 1, 2014. To avoid the individual mandate penalty employees can be covered by insurance through work, a government program like Medicare or Medicaid, or by an health plan they purchase on their own. Those who are not covered face a penalty starting in 2014 of $95 or 1% of household income, whichever is higher. By 2016, the penalty rises to $695 per individual or 2.5% of household income, whichever is greater. Read more about what happens if you don't buy health insurance here.
Q: As a Small Business, Do I Have to Provide Health Insurance?
A: No. The law requires that only larger companies (with 50+ FTE employees) offer health benefits to employees. If larger companies do not offer affordable, minimum coverage health benefits then they may have to pay a penalty. In July, this rule was postponed until 2015. Read more about whether your business has to provide health insurance here.
Q: Are There Any New Small Business Health Insurance Options?
A: Yes. There are two new options for small business health insurance.
First, as part of the Exchanges, there is an option for small businesses called the SHOP Exchange. This is a new way small businesses with less than 50 employees (or less than 100 in some states) can purchase a group health insurance plan, and receive access to the small business tax credits (if eligible). But, if your small business hasn't been able to afford group health insurance in the past, the SHOP doesn't do much to lower the cost.
The second new option for small businesses is to offer a pure defined contribution health plan, where small businesses give employees a healthcare allowance instead of purchasing a group health plan. Employees use their healthcare allowance to purchase a health plan of their choice, and those eligible can access the health insurance subsidies. See: How to Pair Defined Contribution with Health Insurance Subsidies for Cost Savings.
Q: What’s Happening with Medicaid?
A: Medicaid, the government health program for low-income Americans, is expanding under health reform - but it's optional for states to participate. As such, about half of the states have opted out. For states that are expanding Medicaid coverage, essentially all citizens under age 65 with family incomes up to 138% of the federal poverty level (FPL) will now qualify for Medicaid. This translates to about $15,400/year for an individual or $26,300/year for a family of three in 2012. Read more about Medicaid expansion here.
What health reform questions for small businesses and employees did we miss? Help us fill in more Q&As by leaving a comment below.