In early July the Obama administration announced the delay of a key provision of PPACA. Companies with at least 50 FTE (Full Time Equivalent employees) now have until 2015 to provide coverage if they don’t offer it already, giving them an extra year to work through their plan.
In 2014, all non-grandfathered small group plans will have limits on the deductibles charged in-network. The maximum deductible will be $2,000 per individual and $4,000 per family. There also will be out-of-pocket limits that apply to all non-grandfathered plans.
Employers must offer employees information on the public insurance exchange whether providing health coverage or not. The law requires this notice be distributed by Oct. 1, 2013.
All employers are subject to certain rules if providing a health insurance plan, such as:
• Waiting periods for eligibility cannot exceed 90 days, beginning in 2014.
• Continuing to cover dependents of employees until age 26, in most cases.
• Providing a Summary of Benefits and Coverage to each employee at specific events, such as open enrollment.
• Supplying 60-day notification for any plan changes, except at renewal.
How will the pricing methodology change?
The biggest change for small employers will be the price of group insurance plans. Insurance companies will be unable to use gender, industry, group size or medical history, and therefore are limited to family size, geography, tobacco use and age. The companies can charge the oldest ages no more than three times what they charge the youngest ages. In addition, there will be new taxes and fees passed through to the employer in 2014.
For smaller groups the requirement to purchase coverage that includes mandated essential health benefits could increase premiums in some states by as much as 50%.
Where do small employers have flexibility?
A small employer, with fewer than 50 full-time employees, has more flexibility in determining how many hours an employee must work to be benefits-eligible. For example, a small employer can establish 35 hours as the minimum to be eligible for the company health plan. Those employees most likely are eligible for a subsidy to purchase coverage in the public insurance exchange. But, as a small employer not subject to the employer penalties, there are no financial consequences.
If you’re a small company with less than 50 employees, it may make sense to head off the insurance rating rule changes by renewing early. This strategy might be the right solution for a company that needs more time to assess its options. The availability of this option will be determined by health insurance carriers, so be to check with your advisor for details.
What are some other considerations?
The requirement that individuals obtain health insurance or pay a penalty has not changed. The penalty starts at $95 next year, or 1 percent of household income, whichever is higher, and rises to $695 or 2.5 percent of household income in 2016.
The Obama administration said its decisions won’t affect employees’ access to the premium tax credits. In fact, the delay in the employer mandate may result in more low-to-moderate income Americans seeking coverage – many of them eligible for federal assistance.
Mick Sibbel provides Group Benefit and Insurance Plans as an insurance advisor for UNICO MIDLANDS which is jointly owned by UNICO Group Inc and Midlands Financial Benefits. These guidelines should not be the only source a business owner uses to make a decision and should not be considered legal or tax advice.