“Feb. 22–The Affordable Care Act was meant to be a salve for employer-sponsored health insurance costs. The law offers small businesses a carrot for helping employees get health insurance. It also waves a stick at larger employers who decide not to cover workers.
Here is what to expect, according to the U.S. Department of Health and Human Services. Most changes take effect in 2014.
FOR EVERYONE
Coming next year: In 2013, employees can’t contribute more than $2,500 to their annual use-it-or-lose-it flexible spending accounts.
Coming in 2014: The law creates health exchanges — state-run or federal — that businesses with fewer than 100 employees, and individuals who buy their own insurance, can use to comparison shop for plans. Exchanges are slated to launch in 2014. Three years later, they might open up to businesses with more than 100 workers.
Insurance companies must spend at least 80 percent of premium dollars on actual medical care and expenses — not on overhead, salaries or administrative expenses, which feed into premium costs.
Insurers won’t be allowed to charge more based on workers’ health status or gender. HHS says this will lower premiums for many small businesses.
BUSINESSES WITH UP TO 25 EMPLOYEES
If your average annual wage is under $50,000 and you contribute at least 50 percent of your employees’ premiums, your business could qualify for some of an estimated $40 billion in tax credits.
Now through 2013: You can claim a credit up to 35 percent — or 25 percent, for nonprofits — of what you contribute to employee premiums, including dental and vision.
Come 2014, that tax credit goes up to 50 percent, or 35 percent for nonprofits.
Businesses that have 10 or fewer full-timers and average wages under $25,000 will get to claim the maximum tax credit. Here’s the bad news: a Boise benefits company hasn’t found a single Idaho employer whose average salary is low enough to qualify for the tax credit. The credit “didn’t appear to be very viable for anybody,” says Ron Osborne, owner and chief executive officer of Western Benefit Solutions.
BUSINESSES WITH UP TO 50 EMPLOYEES
This year is a “monitoring year,” Osborne says. “Watch and see … what will happen in 2014 … because right now, there’s not much [you] can do.”
One thing that will change in 2014 is that if you employ two to 50 people, health insurance companies won’t deny you coverage or cherry-pick your plan choices based on the health of your workers or their families.
Unfortunately, says Osborne, that means insurance rates for healthy workers may suddenly jump, as they’ll be considered equal to sicker employees.
BUSINESSES WITH 50 OR MORE FULL-TIME (OR EQUIVALENT) WORKERS
Starting in 2013: You don’t have to offer health benefits by March 1. But if you don’t, and any of your employees get a tax credit to buy insurance, you might have to pay a penalty. HHS says the penalties will help the federal government pay for the tax credits.
Employers subject to this penalty will pay the lesser of $3,000 per worker with the premium tax credit, or $2,000 per full-time employee, excluding the first 30 of them.
Around 2014, when the bulk of the big changes kick in, Osborne thinks most employers will switch to a “self-funded format,” especially if they have more than 100 people in their workforces.
A self-funded format is when an employer picks an insurance company or some other third-party administrator to oversee the health plan. The employer pays claims and might take out a catastrophic policy that kicks in for really big claims. By self-funding, “you avoid all state and federal insurance premium taxes” that would drive up costs for traditional employer-sponsored coverage, Osborne says.
More than 60 percent of businesses with at least 100 workers use that system now, especially those with healthier workers, he says. Osborne thinks that will grow to 90 percent or higher in Idaho over the next few years.”