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Updated 9/12/2018 Over the past decade or more, state and federal laws generally required that health coverage providers accept small employers applying for coverage. With groups such as small businesses, the insurer has determined a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender. Small businesses often pay more for employee health benefits because they don't have the buying power of big employers. On average, small businesses paid about eight to 18 percent more than large firms for the same health insurance policy. Health coverage providers may charge different premiums to small employers based on the industry of the employer or on the employer’s prior health claims. As both workers and small employers feel the financial squeeze, fewer are able to afford to offer, or purchase, health insurance coverage. States most often review or approve policies that are offered directly to consumers or to small employers. Most states have had laws that require state-licensed health insuring organizations to provide coverage to small employers that want it, with some limitation on the rates that can be charged (e.g., restrictions on how premiums can vary based on age and health status). The Patient Protection and Affordable Care Act or ACA (P.L. 111-148) assisted and affected small and large businesses in a number of ways.Small Business Snapshot: Beginning in 2014, small businesses have been able to participate in small business health options programs or SHOP exchanges. These programs include new state-based health insurance purchasing pools or CO-OPs (in about one-half of the states) where small businesses are able to pool together to buy insurance. Small businesses are defined as those that have no more than 100 employees. States have had the option of limiting pools to companies with 50 or fewer employees. Companies that are currently defined as small businesses and grow beyond the size limit will be "grandfathered in" and treated like those still within the 100 or 50 maximum. Employer Tax Exemption: The Hidden federal Subsidy That Helps Pay for Health Insurance. Read analysis by The New York Times, 7/7/2017. POSTPONED: "Cadillac Tax" on High Cost Employer Plans. On Dec. 18. 2015 an unusual bipartisan action by Congress and the President 2016 postponed the Affordable Care Act’s (ACA) “Cadillac” tax on high-cost health plans until 2020. While the delay signals bipartisan support and momentum toward full repeal of the tax, those discussions will continue through the transition to a new administration in 2016. In the meantime, this two-year delay will, at a minimum, provide employers additional time to consider appropriate measures to reduce excise tax exposure. The legislation also addresses certain excise tax features as follows:
Other ACA-related changes include a one-year moratorium on the ACA’s annual fee on health insurers’ net premiums (for US risks) and a two-year halt to the tax on sales of medical devices. These fees and taxes were likely to be passed on to employers through increased insured plan premiums and provider costs, and thus will be welcome relief to employers. [MORE] NCSL explains public employer coverage: Small Business Health Care Tax Credit for Small Employers The SHOP law provisions assist small businesses and small tax-exempt organizations afford the cost of covering their employees’ health insurance. If a small business has fewer than 25 employees and provides health insurance it may qualify for a small business tax credit of up to 50 percent (up to 35 percent for non-profits) to offset the cost of insurance, starting with the 2010 federal tax year. This can make the cost of providing insurance significantly lower. Prior to 2014, the small business tax credit was 35 percent (up to 25 percent for non-profits) for qualifying businesses.
Eligibility Rules
Small Business Redefined: On October 7, 2015, President Obama signed into law the Protecting Affordable Coverage for Employees (PACE) Act. The PACE Act amends the definition of “small employer” in the Affordable Care Act (ACA) so that it would continue to apply to employers with one to 50 employees, rather than changing to one to 100 employees as of 2016 as provided in the original ACA; however, the new legislation also allows states to opt for the one-to-100 employee definition of small employer if they choose.
Small Business Health Options Program (SHOP) Exchanges.1Small Business Exchanges have a framework set by federal rules, including options for how employers can provide contributions toward employee coverage that meet standards for small business tax credits. SHOP Exchanges are designed to serve as a marketplace for small employers’ with one to 100 workers, or up to 50 workers if a state chooses that approach. Small employers with less than 50 full-time equivalent employees are not required to offer health coverage. The ACA reformed small group market underwriting and coverage, imposing the same guaranteed issue, modified community rating, and comprehensive coverage requirements on the small group market that it imposed on the individual market. The ACA further created the SHOP exchanges to pool the enrollment of small employers, potentially reducing administrative costs, and to offer individual employees a choice among health insurance plans. Finally, it created a new program to make tax credits available to small employers through the SHOP exchanges that would reimburse up to half of employer contributions towards premiums to pay for employee coverage. Enrollment: July 2, 2015 update: (adopted/excerpted from Tim Jost, Esq, Health Affairs Blog; also Kevin Counihan, CEO of the Health Insurance Marketplaces, CMS Blog) On July 2, 2015, CMS released for the first time numbers on effectuated enrollment in the SHOP exchange program. With the troubled launch of the individual exchanges in the fall of 2013, however, the SHOP exchange took a back seat. The federally facilitated exchanges essentially delayed the launch of the SHOP exchange for 2014 (although they did offer the tax credits) and delayed offering employee choice in many states for 2015. The federally facilitated exchanges made online enrollment available to small employers in the 33 federally facilitated states beginning with the second open enrollment period in November of 2014. Many of the state exchanges offered SHOP exchanges from the time they opened enrollment in 2013. As of May 2015, approximately 85,000 Americans had 2015 coverage through the SHOP marketplaces through approximately 10,700 small employers. These totals do not include employers that enrolled their employees in 2014 but had not renewed for 2015. Unlike the individual market, where open enrollment is only available once a year, employers can enroll in the SHOP exchange at any time. Approximately 500 employers have been enrolling each month since November 2014. These are small numbers compared to the millions of enrollees in the individual exchange. They may reflect competition from private exchanges, which offer many of the same benefits of the SHOP exchange. Private exchanges cannot offer the tax credits, but the tight tax credit eligibility requirements have limited their usefulness to small employers. In any event, the SHOP exchanges are launched and growing, and continue to have potential for making better coverage available to small employers and their employees. Large Employers (100+) mandated to offer health coverageThe Obama Administration has modified the ACA statutory requirement that large employers (initially applied to those with 100 or more full-time equivalent employees) have to offer health insurance or coverage, a one year date change from the original Jan. 1, 2014, now to Jan. 1, 2015. This change was announced July 2, 2013, and modified in February 2014, described below. Employers with 50-99 workers given until 2016 to offer coverage. On Feb. 10, 2014, the Treasury Department extended by one additional year the requirement that employers with between 50-99 workers meet the mandate to offer health insurance, a category that includes about seven percent of the private workforce. The new rules also will require 70 percent of workers to be covered in that first year. Read the Treasury fact sheet here [2 pp.] and final rule here [227 pp.]. How the policy affects employers:
POSTPONED Permanently?: "Cadillac Tax" The So-Called "Cadillac Tax" on Employers with High-Cost Plans (2020 and beyond) Excerpt from Health Leaders magazine, October 13, 2014 On Dec. 18. 2015 an unusual bipartisan action by Congress and the President 2016 postponed the Affordable Care Act’s (ACA) “Cadillac” tax on high-cost health plans until 2020. While the delay signals bipartisan support and momentum toward full repeal of the tax, those discussions will continue through the transition to a new administration in 2016. In the meantime, this two-year delay will, at a minimum, provide employers additional time to consider appropriate measures to reduce excise tax exposure. The legislation also addresses certain excise tax features as follows:
Other ACA-related changes include a one-year moratorium on the ACA’s annual fee on health insurers’ net premiums (for US risks) and a two-year halt to the tax on sales of medical devices. These fees and taxes were likely to be passed on to employers through increased insured plan premiums and provider costs, and thus will be welcome relief to employers. Read More: “The Cost of Spousal Health Coverage”A 2014 study examines what can happen when companies looking to save health costs in 2014 require working spouses to get health insurance through their own employer. Authors find the move has some unexpected consequences, according to a new study by the nonpartisan Employee Benefit Research Institute (EBRI). The federal Patient Protection and Affordable Care Act (PPACA) requires that employers with 50 or more workers provide health coverage to workers and dependent children until they reach age 26. It does not, however, require employers to provide health coverage to spouses, whether or not they are eligible for other health insurance. In 2011, primary health insurance policyholders spent an average of $5,430 on health care services, compared with $6,609 for spouses. This can make them a target for employers looking to control their health benefit costs. [Full report online, 7 pp., PDF]
Guidance on SHOP Exchanges - (Includes archive history 2013-14)The Centers for Medicare and Medicaid Services (CMS) issued guidance in 2013 in the form of frequently-asked questions (FAQs) addressing Small Business Health Options Program SHOP)-Only Marketplaces. The first question asked addresses whether a state may operate a SHOP while the individual market Marketplace is operated as a Federally-facilitated Marketplace (FFM)? The guidance states that it is CMS’ intention to propose through rule that, for 2014, a state that submitted a Blueprint to operate a state-based marketplace and received conditional approval may request to operate a state-based SHOP while the individual market Marketplace is operated as an FFM. All states had the same option starting in 2015. In 2013, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule outlining program integrity guidelines for the Health Insurance Marketplace (Marketplace) and premium stabilization programs. The policies offer clarity on oversight of various premium stabilization and affordability programs, build on state options regarding the Small Business Health Options Program, and provide technical clarifications. The HHS fact sheet is online here. Small Business Health Options Program (SHOP): Some Features Delayed. States Implementing or Delaying Employee Choice in 2015 On May 27, 2014, a final rule "taking the next step" in implementing “employee choice” in the Small Business Health Options Program (SHOP) was published by the Department of Health and Human Services (HHS). “Employee choice” provides employers the opportunity to allow employees to choose any health plan at the actuarial value, or “metal,” level selected by the employer. State Insurance Commissioners were given an opportunity to submit a written recommendation to the SHOP that employee choice not be implemented in that state in 2015 if the State Insurance Commissioner concluded that not implementing employee choice would be in the best interest of small group market consumers in his or her state. An HHS table provides a tally: in total, 18 states with a Federally-facilitated SHOP will allow for this transition relief in 2015. The remaining 14 states with a Federally-facilitated SHOP will join most State-based SHOPs and have employee choice available to small businesses in 2015. In 2015, nearly two-thirds of Americans will live in states where small business workers can choose a health plan rather than have their employer do it for them. The following states with federally-facilitated exchanges (FFMs) implemented Employee Choice in 2015: Arkansas, Florida, Georgia, Indiana, Iowa, Missouri, Nebraska, North Dakota, Ohio, Tennessee, Texas, Virginia, Wisconsin and
Wyoming. Small-Employer (“SHOP”) Exchange Issues- Institute for Health Policy Solutions, 5/2011. A report "describes and assesses distinguishing dimensions important to the design of a successful SHOP Exchange program. 1- The CBO estimates that 24 million people will purchase their own coverage through the Exchanges in 2019. An additional 5 million people are expected to receive health insurance through the Exchanges because they work for an employer who allows all of their workers to choose among health insurance plans offered from the Exchange (though these individuals are not eligible for subsidies). While this puts the projected total number of individuals receiving coverage through the Exchanges in 2019 at 29 million, the CBO estimates consider these 5 million individuals covered by employment-based insurance. Early Retirees and Employer Incentives -- The ACA provides financial assistance to employers that continue coverage for early retirees, age 55-64 [HHS Fact Sheet] State Decisions on Allowing Mid-Sized Employers (51-100) to Delay a Move to the Small-Group Insurance Market (June 2015 update)Beginning January 1, 2016, the ACA expands the definition of “small employer” to mean a business that employs between two and 100 employees. Experts
fear this change could result in premium increases for some mid-sized employers with between 51 and 100 employees, which are currently included in the large-group market, because they will become newly subject to several small-group market reforms. State Options for Large Employers and ExchangesStates can choose to enact stronger consumer protections than these minimum standards for rating and selected other consumer protections. Starting in 2017, states have the option of allowing health insurance issuers that offer coverage in the large group market to offer such coverage through the ACA Marketplace. For states that choose this option, these rating rules also will apply to all large group health insurance coverage. These rules standardize how health insurance issuers can price products, bringing a new level of transparency and fairness to premium pricing. (Source: CCIIO/CMS Fact Sheet, February 2013) Employer Requirements to Offer Coverage (Includes Archive References)
Sources: CMS/CCIIO notices and guidance, 7/2/2012, 2/10/2014; 6/2/2014; Summary of Health Reform Law, Kaiser Family Foundation 4/23/2013 ACA statutory exemptions from the requirement to obtain minimum essential coverageThere are statutory exemptions for nine categories of individuals, based on the definitions below. Additional exemptions have been added by regulations, issued 2012-2018. (#10 and above) Sources: Treasury Department -
Questions and Answers on the Individual Shared Responsibility Provision - Updated 2015
2017: Trump HHS List of Hardship Exemptions, with links to details, forms, and instructions. [Updated 7/22/2017] 1. You were homeless 2. You were evicted or were facing eviction or foreclosure 3. You received a shut-off notice from a utility company 4. You experienced domestic violence 5. You experienced the death of a family member 6. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property 7. You filed for bankruptcy 8. You had medical expenses you couldn’t pay that resulted in substantial debt // 9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member 10. You claim a child as a tax dependent who’s been denied coverage for Medicaid and CHIP for 2017, and another person is required by court order to give medical support to the child. In this case you don’t have to pay the penalty for the child. 11. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace in 2016 12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid in 2017 under the Affordable Care Act 13. Your "grandfathered" individual insurance plan (a plan you’ve had since March 23, 2010 or before) was canceled because it doesn’t meet the requirements of the Affordable Care Act and you believe other Marketplace plans are unaffordable 14. You had another hardship. If you experienced another hardship obtaining health insurance, use this form to describe your hardship and apply for an exemption. 2018-2019 Expedited Mandate Exemption
Process by HHS/CMS Financial impact of the individual mandate (2017 data) (compiled 2017 by the Washington Post):
Rate Review Provides Savings for Small Business Health PoliciesSmall Group Market: In the small group market, analysis of the information from 35 states indicates that the implemented rate increases are approximately 19
percent lower than the rates originally requested by insurance companies.[6] This difference equates to approximately $866 million in savings to consumers based on 2012 small group market premium data. For the 35 states, 18.7 percent of total covered lives had rate requests reduced or denied. Extrapolating to the total number of 18.1 million
covered lives in the small group market, an estimated 3.4 million individuals had rate requests reduced or denied.
Total premiums in the individual and small group markets were lower by an estimated $1.2 billion compared to the total premiums initially requested. ARCHIVE: State Consumer Protection Examples and Initiatives from the Decade before the ACAFor more recent state examples, please visit NCSL's Health Insurance Reform Enacted Laws Related to the ACA, 2011-2014.
Source for Small Group Tables: State Health Facts, Kaiser Family Foundation online.
State Subsidized Enrollment: Results Are Mixed NCSL Online Resources
Archives:
NOTE: NCSL provides links to other Web sites from time to time for information purposes only. Providing these links does not necessarily indicate NCSL's support or endorsement of the site. Compiled by Richard Cauchi, NCSL Health Program-Denver. Earlier research conducted by Steve Landess (2012-13) What is the name for the termination of an insurance policy before the expiration date?Cancellation — the termination of an insurance policy or bond, before its expiration, by either the insured or the insurer.
What is the penalty for small businesses who don't provide health insurance for employees in California?Under the new ACA law rules, a company with 50+ full time equivalents has to offer ACA compatible coverage to full time employees or face a penalty. The penalty for not offering coverage is $2K per eligible employee. A few notes: Coverage is not required for part-time employees (under 30 hours weekly)
What is a guaranteed renewable health insurance policy?A requirement that your health insurance issuer must offer to renew your policy as long as you continue to pay premiums. Except in some states, guaranteed renewal doesn't limit how much you can be charged if you renew your coverage.
Do Florida employers have to offer health insurance?In Florida, all employers with 50 or more full-time employees are required to offer some form of health insurance benefit. Once you have 50 employees, you are considered a large employer. This means that you may face penalties if you do not offer health insurance.
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