Insuring Your Future: The Affordable Care Act – What Small Businesses Need to Know

All systems are still “go” for the Jan. 1 enactment of the next phase of the Affordable Care Act (ACA) aka “Obamacare.” The delay applies only to the penalty that will be assessed to large employers (over 50 employees).{{more}} More importantly, the announced delay does not affect the Oct. 1 start of the exchanges nor the Oct. 1 deadline that all employers must provide their employees with the Health Insurance Marketplace or Exchange Notice. This notice explains whether or not the employer is going to offer the employee health benefits or is going to send the employee to the exchange.

The announcement also does not delay the subsidies designed to help people with low-to-middle incomes to buy coverage; or the requirement that most individuals buy coverage or pay a fine. While most Connecticut employers affected by the delay offer coverage to their employees, individuals whose employers do not offer coverage will need to go to the exchanges to purchase coverage.

Option One – Keep What You Have

Small groups will have the option to change their renewal date to late 2014 and many insurance companies are offering to “freeze” current rates. For some groups there is an advantage in taking additional time and maintaining 2013 rates, while others may benefit from the community rating rules that are part of the ACA. Your agent should be able to advise you on which option is better.

Option Two – Offer A Basic Plan and Give Employees the Option of the Exchange

Starting in January, insurers will no longer be able to set premiums for small-group plans (employers with fewer than 50 employees), based on a firm’s industry or the health or gender of its staff. Insurers will still be able to take into account the age of a firm’s workers, though to a lesser extent, and whether or not those people use tobacco.

The result: the cost of health care will be more evenly spread among small businesses, as employers with mostly young and healthy workers pick up the costs of firms that comprise the opposite. The rebalancing will drive up premiums for some companies in low risk industries with lots of young, healthy workers, such as technology, while moderating rate increases for firms with older and sicker workers, and in higher-risk industries such as industrial manufacturing.

Premiums are expected to rise next year for most small group plans because of new fees and the requirement of maternity, mental health services and prescription drug coverage which are not standard for all policies today. In Connecticut most group plans cover these areas, so the impact may be less than the rest of the country. It is still unclear as to what exactly premiums will look like in 2014 for many businesses. But brokers say small businesses with young healthy employees who perform lower risk jobs can anticipate paying more.

For example, a 23 person technology firm that employs mostly younger males (25-35) could see their premiums rise 25 to 45 percent because gender and age cannot be a factor in setting rates. The company will not be required to provide health insurance next year as the employer mandate only applies to businesses with 50 or more full time equivalent employees. However, benefits are a key to keeping and recruiting quality employees.

By comparison, a metal manufacturer with 16 employees whose average age is in their mid 50s may see a lower rise in premiums than in recent years.

There are also limits on out of pocket expenses and deductibles for group plans as well as tax credits that are available to small employers in the exchange.

Insurance Agents Still Play a Key Role

The ACA is definitely not one size fits all and requires careful consideration of all new requirements as well as cost saving opportunities. Your agent should be working hard to keep up with these changes and advise on the best option for the business owner and their employees.

Trish Pearson is a licensed independent insurance agent and certified Long Term Care Specialist. Contact her at 203-640-5969 0r