Many articles have been written by now on the June 28, 2012, decision of the U.S. Supreme Court to uphold most of the provisions of the Patient Protection and Affordable Care Act (“ACA”). This column will focus on the provisions of the ACA that affect small businesses, a term defined generally as those for-and non-profit businesses having up to 50 employees.
The ACA does not require small employers to provide health insurance to employees. The Employer Responsibility section of the ACA applies to businesses with more than 50 employees. Each state will determine what insurers are required to cover in small employer plans.
For example,, the Insurance Commissioner of Mississippi, the state in which I live and practice, said in a recent press statement that his department will continue to consult with the Governor and legislative leaders about the impacts of the ruling on Mississippi: “We are moving along in development (of ????) a health insurance exchange which will increase access to health insurance and stablize costs for small employers.” This is in sharp contrast to our sister state Louisiana, where Gov. Bobby Jindal has been reported as saying his state would not implement the health-care law. Rather, he will work to have the law repealed, warning that its mandated individual care provisions would lead to the government forcing Americans to eat tofu.
The ACA offers financial incentives to small employers to offer their employees health insurance. A for-profit small business with no more than 25 employees which pays an average annual wage below $50,000 and provides health insurance can qualify for a small business tax credit of up to 35% to offset the cost of the insurance. (It is up to 25% for non-profits small employers.) In 2014, that tax credit goes to 50% (35% for non-profits) for qualified businesses.
One of the difficulties small employers have faced in the past is the difficulty of obtaining affordable health insurance options for their employees. Under the ACA, health insurance companies cannot turn down small employers with two to 50 employees based on the health status of the employees or dependents. Additionally, the insurer must accept everyone in a small employer group; insurers no longer can exclude members with certain health conditions as long as the employer offers dependent coverage. Finally, health insurers must sell to a given small employer any small health plan the insurers sell to other small employers within a particular state.
Also starting in 2014, small businesses with less than 100 employees will be able to shop an Affordable Insurance Exchange like that now being developed in Mississippi and other states. These exchanges are to be new, transparent and competitive arrangements in which small businesses will be able to purchase affordable, quality health plans for their employee groups. The purpose of these exchanges is to give to small employers the type of power large employers now enjoy – to buy higher-quality plans at lower costs. More information about the specifics of what these Affordable Insurance Exchanges will offer should be forthcoming over the next several months.
One thing known now is that through guaranteed renewal, small employer group insurance will not be cancelable for the group or any member just because someone gets sick. In the past, especially in small groups, the serious illness of one employee could affect the ability of the employer to obtain renewal of the group coverage, sometimes at any price.
Some misinformation appeared in various places shortly after the ACA became law in 2010 regarding taxability of insurance costs. Optional in 2011, beginning in 2012, employers must report the cost of insurance on their employees’ W-2 forms. The purpose of the reporting requirement is to give employees a more transparent picture of their actual health care costs. Some have said this type of transparency can lead to less utilization of health care by covered employees, thus lowering the cost to the employers of the health insurance they provide.
For an informative website about the ACA for small and large businesses alike, go to www.healthcare.gov. Among other topics, the site provides information about insurance companies, rate increases, managing insurance, Medicare, and other insurance topics of interest to all businesses.
— Ann Bowden-Hollis