Group Healthcare Plans for Small Businesses: What You Should Know
On March 23, 2010 the Affordable Care Act (ACA) was signed into law by President Obama. More than six years later it’s still a hot button political issue that continues to inspire talking points on both sides of the aisle as well as countless inflammatory headlines. In fact a quick Google News search turned up two recently published stories, one titled “Affordable Care Act has improved access to health care” and the other “Why the Affordable Care Act is anything but affordable,” illustrating the deep political divide that continues to surround ACA.
With all of this noise many small business owners may be confused about the ACA and whether or not they should provide health insurance benefits to their employees. While some business owners are required to do so under the law, others who aren’t may find that it actually doesn’t make sense for them to offer to group plans. If you’re on the fence, here are a few things to think about:
Do you have the option?
The first thing to consider regarding group health care plans is whether you are obligated to have one under the law. If you have more than the equivalent of 50 full-time employees then the Affordable Care Act states that you must offer health care coverage to those full-time employees or face penalty — more than $2,000 per employee. In this case full-time employees are defined as those who work more than an average of 30 hours a week. However, if you have less than 50 employees, then it’s up to you to decide if it makes sense to offer a group plan or not.
What are the benefits for employees?
Before the Affordable Care Act one of the many reasons that individuals preferred group plans was that they weren’t priced to their specific health need. That is to say that they wouldn’t be charged more or denied a policy because of pre-existing conditions. Now the practice of denying coverage based on an existing condition is illegal. As a result the need for some employees to be part of group plan may not be as critical as it once was.
That being said a good group health care plan may provide an employee with better and more comprehensive coverage than they’d be able to afford on their own. Of course this can also depend on how much of the tab you decide to pick up yourself (more on that in a minute). This could be a huge benefit to your employees and one that will earn you their loyalty in the long run.
What are the benefits for employers?
If you have more than 50 full-time employees the benefit of offering a group plan is not having to pay a hefty fine. Meanwhile if you have less than 25 full-time equivalent employees and decide to offer group plans, in addition to the aforementioned benefit of loyal employees, you may be eligible for a tax credit. However in order to qualify for this credit you will need to pay for at least 50% of your employees’ premiums. To see if you qualify and to get a rough idea how much of a credit you might receive Healthcare.gov offers a calculator/questionnaire for small business owners.
The good and bad with the ACA public exchanges
A lot of the controversy surrounding the Affordable Care Act revolves around the public exchanges that are either run by the states or the federal Healthcare.gov site. While some Americans may qualify for significant government subsidies on coverage premiums others have fallen into what’s called the Medicaid gap. This gap was created in states that opted not to expand Medicaid and, as a result, there are some individuals who might make too much to be eligible for Medicaid but too little to qualify for the marketplace subsidies. Currently there are 19 states with these gaps which could mean issues for some low wage earners. Since the ACA defines full-time employees as those who work an average of over 30 hours a week, many full time workers making the federal minimum wage in those states would fall into the Medicaid gap.
Another looming problem with these exchanges is a potential lack of options. Lately big insurance companies like UnitedHealth and Aetna have said they intend to pull their plans from public exchanges starting next year. In some states this could leave people with only one or two options for coverage.
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Despite those issues the subsidies offered to consumers on these exchanges could ultimately make them the cheaper option for your employees. As Arir Sen of the employee benefits management company Gravie recently told Money, “Eighty percent of the time, we find an individual plan to be cheaper than a comparable group plan.” Additionally, in states where there are more options to choose from, employees may prefer being able to choose a plan that meets their specific needs instead of paying into a group plan that might offer more than they need (and at a higher price).
The bottom line
There’s good reason why the Affordable Care Act continues to be a controversial law as experiences can vary greatly by state and individual. Because of this there’s no easy answer to whether or not small business owners who aren’t technically required to supply their full-time employees with a group health care plan should do so anyway. Ultimately it’s best to explore your options including types of plans, how much you should contribute, and whether you’ll be eligible for a tax credit as well as speak to your employees to get their thoughts. If you do decide to pass on a group plan you might also consider assisting your employees as they attempt to navigate the public exchanges. In any case your team will appreciate your hard work and caring when it comes to this complicated but important issue.