By Tracie Rollins
On November 15, 2014, open enrollment begins and small businesses can select health care options for their employees online using the Small Business Health Options Program (SHOP) Marketplace. This period goes until February 15, 2015. In certain states, businesses that hire non-smoking millennials can take advantage of the best premium rates, while others will feel the consequences of hiring older, experienced workers.
SHOP attempts to streamline the healthcare insurance process, which will save you time. The online open enrollment process eliminates the antiquated paperwork option and purchases through insurance brokers. Insurance brokers can continue to help you select the right plan using the SHOP Marketplace, but you’ll need to grant them permission to do so. Although you’re not required to offer insurance if you employ 50 or fewer full-time equivalent employees (FTEs), you may decide to offer it to take advantage of tax credits. Your small business may be eligible for a tax credit of up to 50 percent of the contribution that your business pays towards employee premiums, which translates to happy employees and less money out of your pocket.
You can use the SHOP Marketplace if your small business or non-profit organization employs 50 or fewer FTEs. Using SHOP, you can search for, apply for and enroll in the SHOP plan that meets your needs. In 2015, some states will provide the option to offer more than one plan to your employees giving them the freedom to choose an option that works for them. Before you spend time enrolling and selecting plans, you should ask your employees if they want you to provide a health care insurance option. There’s a minimum employee participation requirement of at least 70 percent with a few state exceptions.
Honestly, I’d kick myself if I went through the entire process and found that most of my staff were covered by other plans following my brilliant health care benefit announcement. Employees that are covered under another employer’s plan, Medicare, Medicaid, military or veteran’s program are not counted in the requirement calculation, but employees with individual private coverage are. That means that you’ll have to do a little bit of math here or use the online calculator. You’ll need to have seven FTEs enroll if you employ 15 employees, but five of them are covered under another plan ((15-5) x 70 percent=7).
The purpose of the Affordable Care Act (also well known as Obamacare) is to provide more Americans with access to affordable health care, improve the quality of health care and health insurance, regulate the health insurance industry and reduce health care spending in the U.S. Prior to the implementation of this law, insurance carriers used medical underwriting as a way to assess risk and calculate premiums. If you had a pre-existing health condition, an insurer could either refuse to sell you coverage or charge you a higher premium. With the Affordable Care Act, there are only five factors that affect pricing:
- Age: Older people can be charged up to three times more
- Location: Competition, local regulation and cost of living is reflected in the price
- Tobacco Use: Tobacco users pay up to 50 percent more than those who don’t use tobacco.
- Family size: Plans that cover a spouse and dependents cost more
- Plan category: Categories reflect how you and the plan share costs. The more you’re willing to pay out-of-pocket, the better chances that you’ll receive a plan with lower premiums. Plans are available in five categories: Bronze, Silver, Gold, Platinum and catastrophic.
Based on these factors, your premiums stand to increase if you’re lucky enough to have healthy, experienced employees who choose vapor over tobacco. Perhaps you’ll give that non-smoking millennial a second shot at an interview in hopes of reducing your premiums. But, be careful here; there isn’t a discount in the world that would offset a lack of job and culture fit.
Beginning in 2015, businesses that employ an equivalent of 50 FTEs or more will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code. If these businesses don’t offer affordable health coverage and one of their full-time employees receives a premium tax credit, the employer may be subject to fines of $2,000 per worker, per year. While the $2,000 per employee penalty doesn’t apply to most small businesses, self-employed individuals must have insurance just like every American. Those who are not covered elsewhere are required to pay a $95 annual penalty for non-compliance.
One of the biggest benefits to offering a plan in your small business is the tax credit. Your business may qualify for tax credits to offset the cost of providing healthcare insurance, but only for plans purchased online through SHOP. Additionally, your small business must meet the following criteria:
- Employ fewer than 25 FTEs
- Pay your employees an average salary rate of $50,000 or less
- Pay at least 50 percent of the premium costs for your FTEs
According to the IRS, tax credits carry back or forward to other tax years. The tax credit is also refundable, so your business may be eligible to receive a refund. As usual, payments in excess of credits may also qualify for a tax deduction. Check with your small business accountant for details or use the tax credit estimator for your unique situation.
SHOP in your state
The federal government runs the majority of the state health exchanges, however, there are a number of states running their own Health Insurance Marketplaces. The list below provides Health Insurance Marketplaces website listings for each state. Click the link relevant to your state to search for plan options and get ready to enroll online on November 15th.
Choosing the Affordable Care Act
Choosing to provide healthcare insurance in your small business is a hard decision. Small business owners have historically experienced difficulties in providing health insurance due to high costs, while larger companies have enjoyed the economies of scale that large group health plans provide. While it may seem like the tides have shifted in favor of helping small businesses become more competitive, the businesses who come out ahead live in states that have a lower cost of living and hire younger, non-smoking staff that are capable of doing the job, hopefully at a lower rate. Whichever path you choose, make sure you can afford it. While providing insurance to your employees helps you stay competitive and improves retention, they’ll still demand a paycheck at the end of the day, regardless of how old or healthy they are.