Did you know the Affordable Care Act (ACA) is 2,049 pages long? I didn’t and I have no intention of ever seeing it in its entirety. So let’s summarize the important stuff for employers (and employees) and move on to binging Netflix.
47% of small businesses offer health insurance.
Executive Summary
- The regulations under ACA are still undergoing changes in 2020.
- The latest addition is HRA or Health Reimbursement Arrangement that allows employees to reimburse employees for coverage they obtain elsewhere.
- The individual mandate (federal tax penalty for not carrying health insurance) is gone in 2020. However, many states are creating their own individual mandates, such as CA, RI, and VT.
Things Everyone Should Know
Employers are required to provide the Marketplace Notice to all employees, informing them of health coverage options available through the marketplace. Templates can be found here. However, there is no penalty for not providing it.
Be aware that the Federal Individual Mandate is now $0, meaning there is no longer a penalty for not carrying health insurance. However, states are implementing their own to keep pressure on individuals to retain insurance coverage (CA, RI, and VT in 2020; D.C., MA, and N.J. already).
Associated Health Plans (AHPs) are in limbo. They were designed to allow small employers and self-employed individuals to band together to give them access to large employer plans at better rates. New regulations expanded the definition of an association. However, a Federal ruling in 2019 invalidated the new regulations.
Fortunately, most of the major payroll processors (ADP, Paychex, and my personal favorite, Gusto) now offer insurance brokerage services in almost every state, so don’t feel like you have to navigate this maze on your own.
What Employers Under 50 Full-Time Employees Should Know
There is no requirement to offer health insurance to employers. However, if you do, you must follow the rules. And there is a separate marketplace for coverage for small employers.
How to Get Group Coverage
Employers under 50 FTE (Full-Time Employees) can access the Small Business Marketplace for coverages. In the Small Business Marketplace, carriers have “list prices” that are consistent regardless of how the insurance is purchased — direct from the insurer or through a broker.
They may only rate the plans based on the location and age of participants. They cannot ask insurability questions and cannot refuse coverage. However, the insurers generally require that 70% of your eligible employees be covered and that the employer pays 50% of employee-only coverage.
And don’t forget if you have trouble getting small business coverage because you don’t meet an insurer’s minimum requirements (70% of eligible employees participating; 50% of employee-only coverage paid by employer), you could be eligible for Guaranteed Availability plans — if you enroll from 11/15 to 12/15 through SHOP (Small Business Health Option Program), part of the Health Insurance Marketplace.
Nationally, the average Group Insurance Premium is $409 versus the average Individual Insurance Premium of $440. So, though it is more expensive to get coverage on your own, it is not insanely more. However, the statistic did not clarify if the plan coverages are comparable, so individuals may be sacrificing coverage to keep the cost down.
If You Offer Coverage, Follow the Rules
If you offer health insurance, you must meet these requirements:
- The waiting period for coverage cannot be longer than 90 days.
- Coverage cannot be discriminatory (same classes of employees must get same coverages).
- Year-End 1095-B’s must be provided (the insurance company will provide).
- Summary of Benefits & Coverage (SBC) will be created by the insurer, but the employer must distribute.
- Employer must comply with Federal COBRA (Continuing coverage) if over 20 employees, but some states may have continuation requirements at fewer employees.
Ever Heard of QSEHRA?
You knew the health industry loved their acronyms and they have a new one! The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) was created in December 2016. This plan allows employers to provide tax-free reimbursement to employees for individually obtained coverage.
- Up to $412.50 per single employees and $833.33 for employees with a family.
It’s a nice stepping stone towards health coverage if the employer isn’t ready to make that leap. It can be used to reimburse spousal coverage. It cannot be offered if the employer offers health coverage.
ICHRA – Individual Coverage HRA
New regulations expanded HRA’s to include Individual Coverage HRA’s (ICHRA), which allows small employers to offer health insurance and an Individual Coverage HRA to different classes of employees. (For example, full-time employees get health insurance; part-time employees get ICHRA.)
EBHRA – Excepted Benefits HRA
Another new variant of the HRA is the Excepted Benefits HRA (EBHRA). The EBHRA can be used to reimburse employees for cost sharing (co-pays), but not premiums. This HRA may be offered in addition to traditional health coverage.
What Employers Over 50 Full-Time Employees Should Know
If you are considered an Applicable Large Employer (ALE), which means 50 or more full-time employees, you must provide health coverage to employees.
Coverage for Large Employers
A Large Employer will not be eligible for Small Group Marketplace Policies, EXCEPT in California, New York, Colorado, and Vermont. These states allow Small Group Policies up to 100 employees. All other employers will be buying coverage through the traditional health insurance market, where the health of your group makes a difference in the coverages and rates.
Large Employer Coverage Requirements
The coverage provided by the employer must:
- Be offered to 95% of full-time employees.
- Meet minimum standards, which is defined as a plan having an actuarial value of at least 60%. More specifically, it means the insurer would pay an average of 60% of all covered medical costs and the insured would be responsible for 40% until the insured reaches their plan’s out-of-pocket limit.
- Meet affordability standard, which for 2020 means the employee’s cost cannot exceed 9.78% of their household income.
The Other Rules
- 90-day maximum waiting period applies.
- Coverage cannot be discriminatory (same classes of employees must get same coverages).
- Year-End 1095-B’s must be provided (insurer will provide).
- 1094 and 1095-C must be provided by the employer.
- Summary of Benefits & Coverage (SBC) will be created by the insurer, but the employer must distribute.
- Must comply with COBRA (Continuing coverage).
An Evolving Law
ACA is now five years into its implementation and the details are still being hashed out. The good news is most of the changes are based around making coverage more accessible to employers and providing more tax-free vehicles to help employees pay for their coverage.
Insurance companies are making their plans easier to purchase from them directly and many national companies are now involved in the purchase of employer group coverage. (Particularly payroll providers as I mentioned earlier.)
You have enough on your plate. Don’t navigate benefits (or payroll or human resources or accounting) on your own. Talk to us for assistance.
