Small Business and the Affordable Care Act
Under the Affordable Care Act (ACA), small businesses with fewer than 50 full-time equivalent employees, will NOT be required to provide health insurance to their employees. However, they have the option of purchasing private insurance through the new Small Business Health Options Program (SHOP) Marketplace in their state. The SHOP is currently only open to businesses with fewer than 50 full-time employees, but will also be open to businesses with 50-100 employees starting in 2016. Small business can continue their current coverage or seek other options in the traditional health insurance market. Tax incentives are available for some small business (with fewer than 25 full-time employees) that opt to offer health insurance to their employees.
The Affordable Care Act establishes marketplaces where individuals, families and small business owners in a state can access health insurance beginning in 2014. You can enroll in SHOP any month, any time of year. There is no restricted enrollment period when you can start offering a SHOP plan to your employees.
There is a SHOP Marketplace in each state, and each exchange has a different set of plan options and prices. For some states, the SHOP Marketplace is operated by the federal government and enrollment takes place on Healthcare.gov. For other states, enrollment takes place on state-run websites. You must have an office or employee work site within a state to use that state’s SHOP. If you have employees in multiple states, you can participate in multiple SHOP Marketplaces, or you can choose a single health plan with a multi-state or national provider network and offer it in all of your business operation locations. Your business can establish only
one account per state. Find information about the SHOP in your state below.
You can sign up for SHOP coverage at any time. If you enroll by the 15th of any month, your coverage starts the first day of the next month. You can enroll directly though the SHOP in your state, or with the assistance of a licensed broker. You can use your current agent or broker, or you can search for one who is registered to sell SHOP plans in your zipcode by searching on your SHOP website. The premiums you pay for SHOP coverage will be the same with or without the assistance of agents or brokers.
Employers who use SHOP must offer coverage to all of their full-time employees. Generally this means those working 30 or more hours per week on average. They don’t have to offer coverage to their part-time employees – generally those who work 29 hours per week or fewer.
If employers offered a SHOP health plan to their employees in 2014 and they had employees enroll in the coverage they offered, they’ll need to handle the renewal of their SHOP coverage offer online.
- They won’t be able to renew SHOP coverage by working directly with an insurance company.
- If they work with an agent or broker, the broker will have to handle renewals and changes to SHOP coverage online too.
When you are ready to sign up, go to Healthcare.gov, select your state, and follow the process. To fill out your SHOP application, you will need:
- Employer Identification Number
- Tax ID
- Number of employees
- Employee information such as date of birth, social security number, address, date-of-hire, and contact information for all employees (and their dependents, if you plan to offer dependent coverage)
After you complete the process and submit your coverage offer, the SHOP Marketplace will send an email to all employees whose email addresses you put on your application. The email includes your participation code and a link to the SHOP website where employees can accept or decline the offer.
You can track employee decisions online. In most states, at least 70% of full-time employees must enroll in the SHOP plan. Employers who enroll in SHOP coverage between November 15 and December 15 each year can offer SHOP coverage without meeting this percentage requirement.
Cost to Employer
In all states, you can select one plan to offer to your employees. In some states, you can select a plan category (like Bronze or Silver) and allow your employees to choose any plan from any insurance company in that category. This is called Employee Choice.
The cost of health insurance to your business will depend on the choices you make such as:
- The level of coverage (Bronze, Silver, Gold or Platinum) you decide to offer employees. The number of options vary by state.
- Choosing whether to offer dependent coverage (some states require it) and dental insurance.
Once you make these decisions, you can obtain a price from the SHOP or your broker. Remember to factor tax credits into your cost analysis (if you qualify). Click here to read more about the Small Business Health Care Tax Credit.
Cost to Employees
Your employees can pay part of their health insurance costs. Their share depends on the level of coverage you choose and the plan they select. As part of the Affordable Care Act, all health plans are classified into one of four categories: Bronze, Silver, Gold and Platinum. The benefits offered by the plans remain the same across the different tiers, but the premium price, deductibles, and out-of-pocket expenses vary among the metal levels. These rankings help to compare different health plans. Some states offer all 4 levels of plans while other states offer two or three levels of plans. Check the SHOP website for your state to see all of the plan options.
Again, as the metal category increases in value, so does the percent of medical expenses that a health plan will cover. This means the Gold- and Platinum-level plans will cover the highest percentage of health care expenses, and Bronze the least.
As the employer, you can set the category in which your employees must choose plans as well as how much you will contribute to the premium payment as either a fixed amount (for example, $400 per month) or as a percentage of total cost to the employees (for example, 70% of premium).
In order to purchase insurance through a SHOP, you must have at least at least one employee other than yourself who receives a W-2 tax form at the end of the year. If you are self-employed without any other employees, you can purchase insurance through the individual exchange in your state. See the ACA overview and 50 State Exchange pages of this website for more information.
Small Business Not Offering Health Coverage
If you decide not to offer insurance to your employees, they will still need to purchase insurance as individuals in order to comply with federal law. The ACA requires individuals to have health insurance or pay a tax penalty if they do not have coverage starting January 1, 2014. Your employees will be able to purchase health insurance on their own in the traditional market or through the exchange in your state. Depending on their income and the state they live in, they may be eligible for Medicaid, premium subsidies, or an Advance Premium Tax Credit. Refer your employees to our 50 State Exchange page under ACA Overview for state-specific information.
Small Business Offering Health Coverage
If you already provide health insurance to your employees, you do not need to change coverage. However, if you already provide health insurance to your employees, you should check to see if you can get better or more affordable coverage through your state's SHOP and see if you qualify for any tax credits. Only plans purchased through the SHOP make you eligible for the tax credit.
Brokers, Agents, and Navigators:
Agents/brokers are licensed by the state and hired by an insurance company to help individuals, as well as employers and their employees, enroll in the insurance company’s plans. They can help you apply for and enroll in coverage in the state SHOP Marketplace. The agent/broker should have a National Producer Number (NPN).
You should not pay more if you use a SHOP agent or broker.
A licensed agent or broker can help you:
- understand eligibility for SHOP and for the Small Business Health Care Tax Credit
- review and compare price, coverage, quality, and other important features
- choose a plan that works for your budget, business, and employees
- apply for insurance for your employees
If you already have an agent or broker, you can continue using your current licensed agent or broker to buy health insurance in the SHOP, provided your agent or broker is affiliated with the SHOP Marketplace.
The premiums you pay will be the same with or without the help of agents or brokers. Agents and brokers are usually paid by the insurance companies whose policies they sell.
A Navigator is an individual or organization trained and authorized to help consumers, small businesses, and employees of small businesses look for health coverage options through the Marketplace. They can complete eligibility and enrollment forms. Unlike brokers, navigators do not have any affiliation with an insurance company. Navigators must always provide information to those they help in a fair, accurate, and unbiased manner.