The ACA: Impacts to Small Groups in 2014 and beyond

Transcript

The Affordable Care Act, or ACA, was passed in 2010. We’ve seen a lot of changes since then, and we continue to support the ACA provisions that are effective in 2014 and beyond. These provisions change how employers and consumers buy health insurance, the types of plans that are available and much more.  

We created a series of videos to help you understand how these provisions affect individuals, small employers and large employers.

In this one, we’ll look at the top considerations for small employers. For many provisions, a small employer is defined as a company with no more than 100 employees, although until 2016, states can limit this to fewer than 50. All states define a small group as fewer than 50 employees for 2014 for small group rating, essential health benefits and risk adjustment provisions. The new ACA mandated provisions are expected to change the small employer insurance market.

In some ways, the ACA treats large and small employers differently. For example, the Employer Mandate says that applicable large employers – that’s companies with an average of 50 or more full-time employees or full-time equivalents – have to offer their full-time employees (and their dependents) access to  minimum essential coverage or pay a penalty. This mandate does not apply to employers with fewer than 50 full-time employees (including full-time equivalents). So these small employers will not be penalized if they don’t offer health insurance to their employees.

Despite this, many small employers are working out their options for offering health insurance to their employees. For small groups, the ACA offers a business tax credit for employers with up to 25 employees and average income of less than $50,000 a year. This federal income tax credit may help to offset premiums they pay for certain employees. Small employers can find more information on the tax credit at www.IRS.gov.

 Small employers have a lot to consider.

  • Should we offer health insurance to our employees, and if we do, should it be employer-based or through an individual or small group public exchange?
  • What kind of coverage do the health plans have to offer?
  • What are the available tax credits for small employers?
  • Are there additional costs associated with offering health insurance to our employees?
  • How will the Individual Mandate affect our employees and our business?
  • Are public exchanges a viable option where our employees live?
  • What are the consequences of not offering access to employer based coverage?

Let’s take a look.                                                                                       

As small employers decide whether or not to offer health insurance to their employees, they have some options. They could simply choose not to provide insurance at all, and direct their employees to the individual insurance market, including an individual or small group public exchange, community and online brokers or agents, and insurers themselves.

Another option is SHOP – that’s the Small Business Health Options Program. SHOP is an online public health exchange where small employers can buy insurance for their employees. Who can use the SHOP exchange? SHOP is only available to small businesses with up to 100 employees, although that number can vary by state until 2016. Until 2016, states have the option to limit eligibility to businesses with fewer than 50 employees. Starting in 2017, states may offer SHOP to large employers as well.  Tax credits are also available on SHOP plans for employers with up to 25 employees and average income of less than $50,000 a year.

Another option for a small employer is to work directly with a health insurance company or broker to buy group coverage on the private market. This is how most small employers traditionally bought coverage in the past. Certified brokers can also help employers purchase plans through the SHOP exchange.

If a small group employer decides to offer health insurance, there are other ACA mandated provisions that may affect the cost of these plans. First, Guaranteed Issue means that no one can be denied coverage or be charged higher premiums because of their health status or because of pre-existing conditions. Second, with Rating Changes, the cost of insurance can be based only on age, where someone lives, family size, and whether or not they use tobacco.

Next, Essential Health Benefits must be provided in non-grandfathered insured small group plans for plan years beginning on or after January 1, 2014. These essential health benefits include 10 categories of benefits that must be covered. These include coverage for hospitalization, wellness services, prescription drugs and other health benefits.

Also, non-grandfathered health plans have to cover preventive care – like child immunizations, cancer screenings, and women’s health services – without cost sharing. That means no out-of-pocket expenses for using these benefits. This is generally true whether a plan is offered through an employer or through a public exchange.

So with more people being covered regardless of their health status, and with more covered services being added, health insurance may cost more in some areas.

Small employers will also see a change to when coverage begins for new employees. The waiting period cannot be more than 90 calendar days.  Keep in mind that state requirements may be more restrictive than this federal one.

There’s another cost factor small employers have to consider. Health insurers and employers will be assessed taxes and fees to help pay for some of the health care reform provisions.

Some examples are the Patient-Centered Outcomes Research Institute fee (PCORI), the Health Insurance Provider fee, the Transitional Reinsurance Contributions fee and the High Value Plan tax (also known as the Cadillac Tax – this one isn’t effective until 2018).

So what happens to the money collected from these taxes and fees? Some of it funds the risk management mechanisms that support pricing stability on the public exchanges. These mechanisms offset the risks for insurers who enroll a higher number of people with high cost claims. The money will also help fund tax credits and subsidies for people with lower incomes who buy insurance on a public exchange.

And remember, the Individual Mandate requires most U.S. citizens to have adequate health insurance coverage or pay a penalty. The penalty for not having coverage starts out low. For example, the penalty for an individual in 2014 is $95 or 1% of their household income, whichever is greater. In 2015, the penalty is $325 or 2% of their household income, whichever is greater. By 2016, the penalty for an individual is $695 or 2.5% of their household income, whichever is greater. So as the penalty increases, more people may be buying health plans to meet this requirement. If a small group employer decides not to offer health insurance, most of their employees will still need to buy coverage as required by the Individual Mandate.

Let’s review the considerations for many small employers.

  • Small companies (employers with fewer than 50 full-time employees, including full-time equivalents) are not penalized if they don’t offer health insurance to their employees.  
  • With more people being covered regardless of their health status, and with more covered services being added, health insurance may cost more in some areas.
  • For small groups, the ACA offers a business tax credit for employers with up to 25 employees and average income of less than $50,000 a year. This federal income tax credit may help to offset premiums they pay for certain employees.
  • Small employers have options for offering health insurance to their employees. They may use the SHOP exchange in their state, buy coverage in the private market, or not offer coverage at all.

The passage of the ACA in 2010 was an important step in expanding access to health insurance. While there are many other important provisions of the ACA, the considerations presented here may have the greatest impact to small employers.

Aetna remains focused on transforming the health care delivery system so that all U.S. citizens have a choice of affordable, simple, health care options. We are committed to fostering compliance with the ACA and helping our customers achieve the same.

Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies, including Aetna Life Insurance Company (Aetna) and its affiliates.

This video is only a high level summary of the health insurance exchange requirements under the Affordable Care Act (ACA). Information contained in this video is subject to change as further regulations and guidance are issued.  This video should not be considered to be legal guidance regarding ACA or its potential impact.