New Options for Small Businesses Under Obamacare
Small businesses with fewer than 50 full-time employees are not required to provide health insurance to their employees. Most of them, however, would sincerely like to do so.
Under the Small Business Health Options Program, created by the Affordable Care Act (better known as Obamacare) and opening for business Nov. 1, 2013, small business owners now have many more affordable options.
High Cost of Healthcare for Small Business
Small businesses that provide health insurance for their employees have traditionally paid much higher rates than large business, 18 percent higher. This is because a small business plan’s risk was spread over a relatively small pool of insured individuals. A small number of illnesses or injuries could greatly increase premiums.
Plus, the accounts themselves were relatively small. When dealing with insurers, small business owners had very little bargaining power.
The SHOP is a marketplace where small business owners can buy affordable health insurance. Risk is pooled across large numbers of insured individuals, and SHOP has the massive purchasing power to negotiate the best rates with participating insurance companies. The result is lower-cost options.
Because of the new spread, employers with mostly young and healthy workers will likely pay more than they paid in the past for traditional limited policies. Employers with older workers will likely pay less.
SHOPs Are Open for Business
Each state has a SHOP marketplace. In 16 states and the District of Columbia, the exchanges are run by the states. In the remaining states, they are run by the federal government (sometimes with assistance from the states). Information about your exchange can be found at www.healthcare.gov or by calling 1-800-706-7893.
Within a state’s exchange, employers can compare price, coverage and quality of a number of employer healthcare plans, and select a plan that works best for them and their employees. Employers can choose how much they can afford to contribute.
Plans must offer employees at least one insurer to choose from. By 2015, plans must offer a choice of multiple insurers. Many of the state-run plans already offer these choices.
Just like the marketplaces for individuals, the SHOP exchanges offer four levels of coverage: bronze, silver, gold and platinum. All cover the 10 essential benefits required by ACA, but each has different levels of deductibles and copayments, and different provider network options.
Qualifying for SHOP
Small business that plan to use SHOP must offer coverage to all of their full-time employees, generally defined as those working 30 or more hours per week on average. In many states, at least 70 percent of full-time employees must enroll in a SHOP plan. There is a formula for calculating FTEs.
SHOP vastly simplifies administration of a health insurance program for small businesses. Employers pay one lump sum to the SHOP, and the SHOP distributes this payment to the various insurers.
Small business employers can enroll online, on their own or with the help of an agent, broker or other assistance. Open enrollment is year-round.
Small Business Health Tax Credit
SHOP participants with fewer than 25 employees who earn less than an average of $50,000 a year are eligible for an expanded Small Business Healthcare Tax Credit. Beginning in 2014, the tax credit is available only through SHOP.
This tax credit covers as much as 50 percent of the employer contribution toward premium costs for eligible employers with low-to-moderate wage workers. It is good for two years. Employers can still deduct from taxes the portion of premium costs not covered by the tax credit.