The Affordable Care Act challenges aren’t over for businesses.
Starting in January, companies employing 50 to 100 workers face complicated and seemingly contradictory new rules that will affect what kind of insurance they offer and how much they and their workers will pay for it.
Wouldn’t you know it, one rule defines them as large businesses and another as small businesses.
“The Affordable Care Act has many different definitions of small business. They’re inconsistent with one another,” says David Chase, California director of the Small Business Majority advocacy organization.
Many of the affected businesses are family-run establishments that don’t have human resources departments, says Liliana Salazar, a senior vice president at Wells Fargo Insurance who advises employers on their benefits packages.
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“Many are completely oblivious to what they’re facing,” she says.
Adam Rochon, an insurance agent in the Central Valley city of Exeter, confirms employers’ frustrations. Many of his small-business clients are farmers and owners of blue-collar companies who are “scared and frustrated.”
“These guys are great truck drivers and farmworkers, but not human resources guys,” Rochon says. “Now they’re forced with paying a ton of money to outsource this or do it themselves.”
Unfortunately, the cost of not complying could also be high.
Q: I am a business owner with 78 full-time workers. Is there anything I need to know about health insurance changes next year?
A: Oh yes.
I’m going to focus on two changes, and I’m going to simplify for your sanity — and mine.
If you think you might be subject to these changes, I highly recommend you seek expert guidance. More on that later.
The Affordable Care Act’s employer mandate requires “large” businesses to provide “affordable” health coverage to their employees or face financial penalties. (That’s affordable as defined by the law.)
Starting Jan. 1, the mandate will expand to include businesses with at least 50 full-time equivalent workers, compared with 100 this year.
In other words, businesses with 50 to 100 workers will be considered large and will be required to offer insurance to their employees.
This year, 89 percent of firms with between 50 and 99 workers offered benefits to at least some workers, according to the nonprofit Kaiser Family Foundation.
Restaurants, retail establishments and construction firms are among the employers in this category that are least likely to offer insurance, says Larry Levitt, a senior vice president at KFF.
Next year, they’ll face a penalty if they don’t.
More specifically, a business will be dinged if it doesn’t offer insurance to at least 95 percent of its full-time employees and their children, or if the coverage it offers doesn’t meet the Affordable Care Act’s standards. (Businesses don’t necessarily have to provide coverage to spouses, Levitt says.)
Under the law, a full-time employee is someone who works an average of at least 30 hours a week.
The penalties kick in if at least one of the business’ employees signs up for a plan from a health insurance exchange such as Covered California and receives tax credits to reduce the cost of the plan.
The penalties can easily climb into the tens of thousands of dollars.
“A small business can’t afford a penalty,” Salazar says.
Because this can be complicated, the federal government is giving businesses that are newly subject to the mandate until April 1, 2016, to comply, Salazar says.
In addition to the requirement that these business offer insurance, California is among a handful of states that next year will change the definition of “small” business to include them.
This Affordable Care Act-related change will define small businesses as those with up to 100 full-time equivalent employees, up from 50 now.
Employers classified as small, rather than large, businesses must offer health insurance that complies with a different and expanded set of Affordable Care Act rules.
As a result, most of these businesses will have to purchase new plans that meet the requirements.
“The insurance carriers and products are different,” Chase says. “The way they calculate the premiums is different.”
For instance, under the new rules, the health plans must contain standard designs — think of those bronze, silver, gold and platinum coverage tiers offered by Covered California — and cover specific medical benefits. They also limit how much more insurers can charge employers for older workers than younger ones.
“If you’ve got a young and healthy workforce, you might see a premium increase,” Levitt says. “If you’ve got an older, sicker workforce, you might see a premium decrease.”
Overall, Salazar predicts that both employers and workers will see higher premium costs.
Covered California, the state’s health insurance exchange, is opening its small business exchange to businesses in this category and has “experienced a noticeable surge in enrollment” in the past few months, spokesman Larry Hicks says.
CaliforniaChoice, a private health insurance exchange for small businesses, also is opening to these employers and has seen a jump in enrollments, CEO Ron Goldstein says.
Finally, you’ll recall from the “employer mandate” section that businesses with fewer than 50 full-time equivalent employees are not required to offer insurance to their employees. However, if they do, their plans also must meet Affordable Care Act requirements for small businesses.
If you’re a business in this category, seek guidance. The details are incredibly complex.
• Reach out to your local or state chamber of commerce, which can help you figure out where you stand.
• Consider hiring an employee benefits consultant, who can advise you on how to comply with Affordable Care Act requirements.
• A licensed insurance broker can help you find the right health plan for your business, and there’s no extra cost for the help.
Starting in January, Ask Emily is moving to a new home with Kaiser Health News. Please start directing your questions to AskEmily@kff.org.