What Small Businesses with Fewer Than 50 Employees Need to Know About Obamacare

By hrs-admin / August 19, 2014 / Uncategorized No Comments

Small-business owners have a lot to worry about, and the Patient Protection and Affordable Care Act — also known as PPACA, ACA or Obamacare — has brought a lot of confusion since it became law in 2010. Since then there have been changes to requirements and deadlines that have further complicated things and confused businesses trying to remain compliant.

Here’s what small-business owners with fewer than 50 employees need to know now.

Small Businesses with Fewer than 50 Employees Don’t Have to Provide Health Insurance

This may be one of the most misunderstood parts of the law. “There is no mandate or requirement for these size groups to offer medical benefits before or since the law [took effect],” says Geoff Owens, a benefits consultant who works with small and mid-sized businesses on benefits with Kistler Tiffany. The mandates are for employers with 50 or more employees. Smaller businesses can offer health insurance coverage as they see fit to help attract, maintain, and motivate top talent, and to manage business expenses through tax deductions, he says.

Still, small businesses that are involved in a business group or that hold ownership in other ventures will need to carefully check where their employees are counted under the law. In some cases what may seem like two small businesses will count as one business under the law, which could push their employee count to 50 or more and make them subject to the employer mandate.

The Health Insurance Rate Structure Has Changed

In the past, the rates were composite-based on family status (employee only, employee and spouse, employee and children, family), says Owens, as well as other factors such as claims history, health status and gender. However, this will change for non-grandfathered plans.  “Moving forward, each covered employee and dependent will have their own rate based on their age and smoking status.” This can present a challenge to businesses as they try to structure employer premium contributions, as monthly premiums may vary greatly from one employee to another although electing the same coverage level; older employees and smokers will have much higher premium amounts, for example.

There’s a Cap on Children’s Coverage Costs

With the change in rate structure, you will see the distinction between child (birth to age 20) and adult dependents (ages 21 to 25) as well.  Each dependent will have an associated premium to be added into the employee’s overall monthly premium, but carriers will cap the cost for child dependents.

“If you have more than three children under 21 years old, you only have to pay for three — that is the cap,” says Bill Schmidt, president of SBIS Inc. “However, if you have more than three children between the ages of 21 and 26, you will pay for each and every one.”

You Can’t Subsidize or Reimburse for Employees’ Individual Coverage

Schmidt says he often gets questions from small employers about paying employees to purchase an individual plan if the company is not offering a group plan. “The single biggest surprise for small employers is that they cannot,” he says. “Reimbursement is not allowed under IRS rules.” Also, employers may not directly pay for the employees’ individual policies.  Instead, Schmidt says, small employers that want to help their employees pay for individual health insurance policies should increase salaries, making the company’s “contribution” taxable, or roll out a group plan and pay for it that way.

Offering Group Benefits is Still a Good Idea

With these new options for small businesses, some employers may wonder if they should continue offering group benefits now that the Marketplace is available for individuals to shop for their own coverage, Owens says. The decision will depend on the business owner, but group coverage is still seen as a useful benefit to attract and retain top talent.

Employers with lower income employees can take advantage of government subsidies by allowing their employees to go to the Exchange, Owens says. “In the latter scenario, employers can help their employees by using a broker to help their employees shop for coverage, as the premium costs on the marketplace are the same whether a broker is used or whether they go it alone.”

Contact us if you have more questions about offering health insurance and other benefits to your small business’ employees. We’re here to help. HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.

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