It’s time to get up to speed on Obamacare, because the biggest provisions of the three-year-old Affordable Care Act go into effect on Jan. 1, 2014, and companies need to start making choices even sooner than that.
This October, private insurance plans reflecting next year’s new requirements will go on sale for the first time.
According to Stephanie Marquis, spokeswoman for the Washington Office of the Insurance Commissioner, the rules vary by state. In Washington, companies fall into two broad categories:
- Businesses with more than 50 full-time equivalent employees must offer health insurance beginning Jan. 1, or pay a penalty. And insurance plans must meet quality standards to count.
- Businesses with one to 50 employees are not required to offer health insurance, but starting Jan. 1 they may be able to get larger tax credits than in the past if they opt to enroll their workers.
Individuals and small businesses will be able to by insurance through new online marketplaces, called exchanges, starting in October. At least at first, however, these insurance exchanges may not offer as many choices as companies can find by dialing up an insurance broker.
Changes for small businesses
Small businesses – those with one to 50 workers – are the only companies that will be allowed to shop on the state’s new public health insurance marketplace, called the Washington Health Plan Finder.
Those tax credits can be quite appealing. Currently, for-profit businesses can receive a credit of up to 35 percent of insurance premiums. Starting Jan. 1, the credit climbs to 50 percent of premiums. Not every company will qualify for the full credit, however. Marquis recommends using an online calculator to determine a company’s possible maximum credit, such as that offered by the National Federation of Independent Business: www.nfib.com/advocacy/healthcare/credit-calculator
The rules are still being written, Marquis said, but it’s possible that companies will have to buy through the exchange in order to qualify for new tax credits.
If final rules do require small businesses to buy insurance through the public exchange to receive tax benefits, some may decide the credit is not worth the effort just yet. That’s because only one health insurance company has signed on to offer small business exchange plans in 2014 – Kaiser Permanente – which will offer several different plans.
Kaiser is the only insurer in Washington to offer health insurance on the state’s small business exchange, and its plans will only be available in Clark and Cowlitz counties. Those plans begin at about $200 per month per covered person, and climb from there, according to Kaiser officials. Small businesses in the rest of the state will have to buy insurance directly from insurers or through brokers, an option that remains available in Clark and Cowlitz counties, too.
Kaiser made a push to be included on the insurance exchange in part because of its strong belief in the value of competitive insurance marketplaces, said Alison Nicholson, senior director of individual, family and small business plans for Kaiser Northwest. The nonprofit health company also wants its plans included on exchanges because of the likelihood that only exchange plans will qualify for tax credits.
Nicholson also said that even businesses that do qualify for tax credits should comparison shop.
“There’s still a very robust market, and there is choice for employers as to whether going through the exchange is right for them,” she noted.
Marquis said it’s likely that other insurers will begin offering small-business exchange plans starting in 2015, but most were so focused on their individual exchange health plans that they did not submit small-business proposals.
The smallest businesses in Southwest Washington may have the most to gain from new reforms. One-person companies, such as contract-workers or consultants, will be eligible to buy small-business health insurance plans. In the past, many had to buy insurance on the individual marketplace. Historically, small business plans have cost less than individual plans, Marquis said, so the new rules could be welcome news for one-person operations.
Even here there is a caveat, however: to qualify as a self-employed business, individuals must receive at least 75 percent of their income from the companies they run. So people who become self-employed partway through the year or who have multiple income streams may still not be able to shop on the small business exchange.
New rules for big businesses
Companies with more than 50 full-time employees will need to offer health insurance to avoid a penalty. Plans must be deemed “affordable” – which means the employee’s share must be less than 9.5 percent of his or her household income, and the plan must pay at least 60 percent of covered health insurance.
The penalty for providing inadequate coverage may be higher than the penalty for not providing coverage at all, so it’s important to consider the quality of plans being offered to workers.
If a large company does not offer health insurance and one of its employees then receives a tax credit or subsidy to buy individual health insurance, the employer will be penalized $2,000 per full-time employee, up to a maximum of $60,000 per year. If a company does offer health insurance, but it’s unaffordable and a worker receives a tax credit or subsidy, then the employer will be penalized $3,000 per full-time employee, up to a maximum of $60,000 per year.
It sounds confusing, and Marquis said she has heard anecdotal stories about employers cutting hours or opting not to hire new workers so they have fewer than 50 full-time workers on staff and thus don’t have to follow the new rules.
But most companies should be able to easily comply with the law by talking with their insurance broker or other vendor, Marquis said.