The health insurance exchanges, a fundamental element of the health care reforms implemented by the Affordable Care Act (ACA), are now open for business. Individuals and business owners alike now have new choices when it comes to shopping for health insurance coverage. However, many business owners remain unsure about what they can find on the exchanges, whether they have to provide health insurance for their employees, whether they will be fined or face other penalties for failure to comply with the new law and what, exactly, the new law requires of them in terms of providing health insurance for their employees. Read on or watch this video to learn the truth behind some of the most persistent Obamacare myths.
In fact, no company of any size is required to provide health insurance coverage to its employees. Companies who have more than 50 employees will, starting in 2015, be required to pay a tax penalty if they do not offer employee health coverage that meets the minimum coverage and affordability requirements laid forth under the ACA. It’s this provision that has come to be known as the “employer mandate.” Large employers with more than 50 employees may very well choose to pay the tax penalties and not offer health insurance coverage to their employees.
The ACA exempts smaller employers — those with fewer than 50 employees — from the requirement to provide health insurance coverage. Ninety-seven percent of businesses in the U.S. fall into this category, so few employers will be required to pay tax penalties if they do not provide health insurance to their employees.
The new health insurance exchanges are intended as an alternative to the current insurance market. They provide an option for consumers and employers to shop for and compare plans and rates. However, individuals and business owners alike will still be permitted to buy insurance the old-fashioned way, directly from an insurance company or private broker. The exception is the District of Columbia, where small employers who opt to provide health insurance coverage to their employees will have to buy it through the city’s insurance exchange. In coming years, small firms in the District of Columbia will have to renew their employee health insurance coverage through the exchange.
The health insurance exchanges are simply online shopping portals. While the exchanges themselves are administered by the state or federal government, the health insurance plans they offer are still operated by private insurers. In no way is the federal government, or your state government, involving itself in the administration of yours or your employees’ health insurance plan.
This is a persistent Obamacare myth that has scared many small and midsize business owners. While employers covered by the Fair Labor Standards Act were required to provide written notice to their employees about the opening of the Health Insurance Marketplace prior to October 1, 2013, there is no penalty associated with failing to provide that notice.
There will be federal tax breaks to help small business owners pay for employee health insurance coverage purchased on the exchanges, but not all businesses will be eligible for them. The small business exchanges will sell plans to companies with up to 50 employees during their first year, and perhaps during their second year, but will be required to raise that cap to 100 employees by 2016. Very small businesses, those with 10 or fewer employees, will receive the full tax subsidy of 50 percent of their costs. Businesses with up to 25 employees will get a partial tax subsidy.
This feature was originally intended for all of the exchanges, and would have allowed small business owners to pick either a single plan for all employees company-wide or a selection of plans in order to give employees a range of choices. However, the Department of Health and Human Services announced last year its intention to delay this feature on the federal exchanges, which are used in most states. For the time being, at least, smaller employers who want to provide health insurance coverage for their employees will have to choose a single plan for the whole company. In the District of Columbia and the 16 states that built their own marketplaces, the multi-plan option is already available.
Health care reform is upon us, and its requirements for small and midsize businesses can be confusing. The circulation of myths about the Affordable Care Act hasn’t helped matters. Separating the truth from the rumors will make the prospect of choosing health care coverage options for your employees much less frightening.Back to blog list