Archive for November, 2012

Healthcare Reform Update: Small Business Considerations for Implementing Health Care Reform

November 27, 2012

Healthcare Reform Update: Small Business Considerations for Implementing Health Care Reform

Now that the election is over, we have clarity on at least one front – healthcare reform measures set forth in the Patient Protection and Affordable Care Act of 2010 (“ACA”) are on track for continued implementation.
Health insurance coverage, offered as a benefit of employment, is a mainstay of compensatory arrangements in place throughout the United States. According to the Kaiser Foundation, almost 160 million people under the age of 65 receive health insurance benefits through employer sponsored health plans. The ACA contains numerous provisions that will affect the decisions employers make in the future about employer sponsored insurance coverage after changes go into effect at the beginning of 2014, including requirements for certain large employers to offer acceptable health insurance options to employees or face penalties for their failure to comply.

While the ACA does not expressly mandate that employers offer acceptable health coverage to employees, those with at least 50 full-time equivalent employees (FTEs) may be penalized, beginning in 2014, if acceptable plans are offered but one or more of the company’s full-time employees obtains a premium subsidy through a Health Insurance Exchange (“Exchange”) or the offered plans are deemed unaffordable and/or lacking essential coverage. Employers with more than 30 full-time employees may also be penalized if no employer plan is offered and at least one full-time employee receives a cost subsidy, such as a premium credit, toward coverage secured through an Exchange. Employees may be eligible for credits based on income level and their eligibility for Medicaid benefits.

It has been estimated that only 36% of small businesses offered health insurance benefits by 2011 and 79% of those businesses now indicate that they do not expect to interrupt health insurance coverage for their employees as a response to the mandate imposed by the ACA. However, 69% of those same employers indicated that they will require their employees to participate to a greater degree in cost-sharing initiatives to keep employer costs down through higher co-pays and deductibles. For small businesses the average growth in paid wages was just over 2% in 2011, while the cost of health insurance benefits grew by 9%. It is also noteworthy that, as of November 2012, 26% of small businesses indicated that they are not yet prepared to implement changes designed to accommodate the requirements of the legislation. The ACA requires that:
1. Employers with 50 or more full time equivalent employees must offer a minimum level of coverage or be subject to calculated penalties.
2. Small employers with fewer than 25 employees may be eligible for federal tax credits that will offset up to half of the employer portion of health coverage premiums.
3. As of 2014 insurance deductibles will be limited to no more than $2,000 for individuals and $4,000 for individuals and their insured dependants.
4. Essential health benefit levels must be in place for non-grandfathered plans as of 2014 and all such plans will be rated based on the percentage of actuarially defined coverage of health costs with the minimum level of coverage being set at 60%.
5. Non-deductible penalties will apply as of 2014 and may be triggered for “large” employers whether or not employer sponsored coverage is made available based on employees obtaining premium credits for coverage purchased through a health insurance exchange. Penalties may also apply if employee contributions exceed a percentage of household income.
For more detailed information on the provisions of the Affordable Care Act, please request a copy of C3 Advisors’ updated whitepaper entitled “Healthcare Reform – What Employers Need to Know Now” by e-mailing your request to