Most small business owners know that unless they have 50 or more full-time exempt employees (FTEs) they’re not required to offer health coverage. However, if you’re a new business owner or are just now looking to offer your employees insurance options, this may be unfamiliar territory.
While not every business with less than 50 employees chooses to invest in health insurance, according to one survey, over half or 56 percent of smaller employers currently offer health insurance to employees.
And the benefits of doing so are numerous and substantial.
The Impact Of The Affordable Care Act On Small Business Health Insurance
The Affordable Care Act (ACA), also known as Obamacare, was enacted in 2010 with the aim of expanding access to affordable health insurance coverage in the United States.
While the ACA primarily focuses on individual insurance markets, it has also had notable implications for small businesses and their health insurance offerings. In this article we will provide a brief overview of the impact of the ACA on small business health insurance and highlight some key changes.
Increased Options And Marketplaces
The ACA established Health Insurance Marketplaces, where individuals and small businesses can compare and purchase health insurance plans.
These marketplaces and programs provide increased choices and transparency for small businesses, empowering them to find affordable coverage that suits their needs.
This means that small business owners who may have struggled to navigate the complex insurance market can instead use the SHOP marketplace to explore various plans and make an informed decision for their employees.
Employer Mandate and Shared Responsibility
The ACA employer mandate is a provision that requires large employers to offer affordable and comprehensive health insurance to their full-time employees and their dependents or pay a penalty to the IRS. Full-time employees are those who work at least 30 hours a week and large employers are those who have 50 or more full-time employees or full-time equivalents. The employer mandate is also known as the employer shared responsibility provision or the “pay or play rules”.
Under the ACA, businesses with 50 or more full-time employees are required to offer health insurance coverage or face penalties.
The employer mandate aims to ensure that large employers contribute to their employees’ healthcare costs and reduce the burden on public insurance programs.
Small businesses with fewer than 50 full-time employees, however, are exempt from the mandate but can still choose to offer coverage through the SHOP marketplace.
Example: A small business with 48 employees is not mandated to provide health insurance, but it may still opt to do so to attract and retain talented employees, leveraging the benefits offered through the ACA.
Tax Credits And Cost Assistance
The ACA provides tax credits and cost assistance to eligible small businesses that offer health insurance coverage to their employees through SHOP.
Small businesses with fewer than 25 full-time equivalent employees and average wages below a certain threshold may qualify for tax credits.
These incentives help alleviate the financial burden of providing health insurance for small businesses, making coverage more affordable.
A small business with 15 employees, for example, with average wages below the threshold can take advantage of tax credits to significantly reduce the cost of providing health insurance, enabling them to offer better benefits to their workforce.
So, how does this work?
Businesses that have fewer than 25 full-time equivalent employees, pay average annual wages below $50,000, and contribute 50 percent or more toward employees’ self-only health insurance premiums may qualify for a small business tax credit of up to 35 percent to help offset the costs of insurance.
The maximum credit is 50 percent of premiums paid for small business employers, and 35 percent of premiums paid for small tax-exempt employers. The credit is available to eligible employers for two consecutive taxable years. The amount of the tax credit you receive is based on a sliding scale. Simply put, the smaller the employer, the bigger the credit.
Essential Health Benefits and Pre-existing Conditions
The ACA mandates that health insurance plans, including those offered by small businesses, cover essential health benefits such as preventive services, prescription drugs, and mental health treatment.
The law prohibits insurers from denying coverage or charging higher premiums based on pre-existing conditions.
These provisions ensure that employees of small businesses have access to comprehensive coverage and protection from discrimination based on their health status.
What this means for your business is that, because of the ACA’s protections, an employee with a pre-existing condition, previously denied coverage or charged exorbitant premiums, can now access quality healthcare through your company’s health insurance plan.
[h3] Administrative Simplification
The ACA introduced standardized health insurance forms and requirements, reducing administrative complexity and paperwork burdens for small businesses.
Small businesses can now focus more on their core operations rather than grappling with intricate insurance processes.
In other words, a small business owner no longer needs to spend significant time deciphering complex insurance paperwork, allowing them to devote more attention to running their business effectively.
Small Businesses Have Benefited From The Provisions Of The Aca
It is true that the Affordable Care Act has had a significant impact on small business health insurance by offering increased options, tax credits, essential benefits, and administrative simplification.
And although the employer mandate only applies to larger businesses, smaller enterprises can also benefit from the ACA through the SHOP marketplace. By expanding access, reducing costs, and ensuring essential coverage, the ACA has played a vital role in improving the availability and affordability of health insurance for small businesses and their employees.
Need Help Finding Health Insurance Coverage For Your Business?
J.C. Lewis Insurance has been a local, family-owned firm based in Sonoma County since 1979, and our team of expert brokers offers small business and individual health insurance plans from only the leading health insurance carriers that are licensed to do business in California.
In addition to being experienced, professional brokers, we are licensed and certified by each of these insurance carriers to offer coverage to individuals, families, and small group employers in addition to Medicare supplemental and prescription drug plans for seniors.
When you’re shopping for vision, dental, or health insurance for your employees you will likely have several questions and concerns.
At J.C. Lewis Insurance Services we welcome your questions about insurance coverage and you can be confident that we will help you find the right solution.
FAQs on Maximizing Health Insurance Coverage
1. How can I save money on healthcare with a high-deductible health plan?
With a high-deductible health plan (HDHP), maximizing in-network services can save you money. Providers in your insurance network often offer lower rates, meaning you pay less out of pocket. Additionally, inform your doctor’s office about your high-deductible plan and ask for cash discounts or no-interest payment plans to further reduce costs. Over 43% of insured Americans now have high-deductible plans.
2. What should I do if my prescription isn’t covered by insurance?
When your prescription isn’t covered, ask your doctor for a generic version and compare prices across pharmacies. Prices for generics can vary by as much as 440% depending on the pharmacy. You can also look at online mail-order services that often offer lower prices. Websites like GoodRx can help you find deals on medications not covered by your insurance.
3. How can I lower the cost of prescriptions with health insurance?
One way to lower prescription costs is by opting for generic medications, which can be significantly cheaper than brand-name drugs. Additionally, use price comparison tools like GoodRx or pharmacy discount programs, which can save you up to 85% on certain medications. Even with insurance, these alternatives could offer lower prices than your co-pay.
4. What’s the benefit of knowing my out-of-pocket maximum?
Understanding your out-of-pocket maximum ensures that after you hit this cap, your insurance covers 100% of eligible medical expenses. For example, in 2023, the out-of-pocket maximum under ACA plans is $9,100 for an individual and $18,200 for a family. This means all medical services after that threshold will be fully covered by your insurance.
5. How can I get the most out of my health insurance plan?
Maximizing your plan involves using in-network providers, opting for preventive care, and timing medical procedures after meeting your deductible. Preventive services like annual physicals are often free, while once your deductible is met, further services cost significantly less. In fact, 93% of ACA-compliant plans cover preventive services at no cost.
6. Why should I schedule medical procedures once I meet my deductible?
After meeting your deductible, you’ll only need to pay a coinsurance rate, which can range from 10% to 40% depending on your plan. Once you hit your deductible, further medical procedures become far more affordable. This can help you save hundreds or even thousands of dollars annually.
7. Can I use a Health Savings Account (HSA) with a high-deductible health plan?
Yes, an HSA allows you to save money pre-tax for medical expenses, which can be used to pay for qualified services like doctor visits, prescriptions, and even some dental and vision care. In 2023, individuals can contribute up to $3,850 to their HSA, while families can contribute up to $7,750. This tax-free savings can significantly reduce your medical costs.
8. What happens if I don’t meet my health insurance deductible?
If you don’t meet your deductible, you will continue to pay for most services out-of-pocket. However, preventive care such as vaccines, screenings, and check-ups are often covered without requiring you to meet your deductible first, as mandated by the ACA. You can save on these essential services even if you haven’t met your annual deductible.
9. Can I negotiate medical bills with a high-deductible plan?
Yes, many healthcare providers are open to negotiating bills, especially if you’re paying cash or have a high-deductible plan. According to a 2022 survey, about 60% of patients who negotiated their medical bills successfully reduced them. Always inquire about discounts or payment plans before settling medical bills.
10. How do I make the most of preventive care services with my health insurance?
Most health insurance plans, especially ACA-compliant ones, cover preventive care services at 100%, which means you won’t pay out-of-pocket for services like vaccinations, screenings, or annual check-ups. By staying on top of preventive care, you can avoid costly medical issues down the line, while taking advantage of services covered at no cost to you.
