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What Every Small Business Should Know About The Affordable Act

What businesses need to know about ACA
The Affordable Care Act includes new health care reform that will affect small businesses. Understanding the mandates can help both self-employed individuals and small employers better navigate the law and help ensure compliance moving forward. The list below provides a snapshot of some of the important mandates that may impact your small business in 2014.

1) Health Insurance Exchanges For Small Businesses (SHOP)

Health insurance exchanges are new marketplaces where small businesses can shop for health coverage starting in 2014. The marketplace within the exchange for small businesses is called the “Small Business Health Options Program” or SHOP. States will have different names for their respective exchange. For example, California’s health insurance exchange is named “Covered California”, however, each exchange will have a SHOP within it for small businesses to purchase coverage.

2) Open Enrollment

Open enrollment for purchasing coverage on the SHOP begins on October 1, 2013. Small businesses can purchase plans through the SHOP or the traditional market at any time of the year.

3) Essential Health Benefits

All health plans in the small group market, both inside and outside of the exchanges, must offer the 10 “essential health benefits” categories that include services, emergency services, hospitalization, maternity and newborn care, and preventive and wellness services.

4) Standardized Levels of Coverage

Beginning 2014, all small group health plans will fall into four levels of coverage: bronze, silver, gold and platinum. These levels represent the “actuarial values” the plans must meet, 60%, 70%, 80% and 90% repectively. The acturial value represents the anticipated share of costs a plan will cover. The overall intention of grouping plans by these levels is to allow people to more easily compare plans with similar levels of coverage.

5) Employer “Pay or Play” Rule

Most small businesses will be exempt from the “Pay or Play” rule, which requires businesses with 50 or more employees to offer health care coverage to their employees or pay a penalty tax. For guidance on determining your employee total for the purposes of this rule, you can call us at 888.430.7510

6) Tax Credits

Employers with 25 or fewer full-time equivalent employees who are paid an average annual salary of less than $50,000 may be eligible for a tax credit covering up to 50% of the cost of premiums. Starting in 2014, health coverage must be purchased inside the SHOP in order to receive the credit.

7) ACA Taxes

While the ACA provides tax credits for qualifying small businesses, it also taxes plans to pay for subsidies and finance high risk individuals. The 2 new taxes beginning in 2014 are:

a) Health Insurer Tax: This tax will be approximately 2.3% of premiums.

b) Transitional Re-Insurance Tax: From 2014 to 2016, this tax funds programs to finance the cost of high risk individuals and is expected to represent 1.5% of premiums.

8) Small Group Redefined

The Affordable Care Act changes how small groups are defined. Starting in 2014, 1 to 50 employees will constitute a small group in California. In 2016, this number will expand to 1 to 100 employees.