Decoding the ACA: Small businesses face insurance option, shopping challenges

2013-09-29T19:30:00Z 2013-09-29T20:00:29Z Decoding the ACA: Small businesses face insurance option, shopping challengesBy Tammie Gitt, The Sentinel The Sentinel
September 29, 2013 7:30 pm  • 

In his role as the executive director of the Mechanicsburg Chamber of Commerce, Jeff Palm has seen rooms filled with small business owners attending workshops, hoping to find answers to their questions about the Affordable Care Act.

Open enrollment at the federal Health Insurance Marketplace starts Tuesday, and many businesses are still asking questions.

“There’s nobody that can explain it to us in easy, people-speak,” Palm said.

As politicians play games in the days leading up to the implementation, business owners never know what is going to happen, Palm said.

“Every day there are more people asking what they need to do,” said Robert Kole, president of Benefit Connections, an independent insurance agency that works with about 200 employers to develop benefit plans for their employees.

Kole said the Affordable Care Act breaks businesses into two groups: those with 50 or fewer employees and those with more than 50 employees. There’s a completely different set of rules for each.

“The small business class has no requirement to offer health insurance,” Kole said. “You can continue to do what you’re doing.”

This means businesses are not prevented from dropping health insurance coverage for its employees, nor are they required to start offering coverage.


There are, however, some administrative requirements for small businesses.

Last year, businesses were required to provide a summary of benefits and coverage. For the first time, summaries from various insurance companies will look alike.

“The carriers are providing that, but (business owners) are responsible for putting that in the hands of their employees,” Kole said. “If they don’t, they can be fined.”

That sounds like a good idea, Kole said, but it’s more complex and difficult to understand than summaries previously offered by insurance providers.

Both large and small businesses are also required to issue a notice to employees about the marketplace exchange, a place for individuals to go shopping for insurance, Kole said. The fine for not providing the required notice is $100 per day, but that’s not being enforced this year.

What an individual encounters on the exchange will depend upon what, if any, plan is offered to the employee. If the employer offers no insurance coverage or coverage that does not meet the minimum requirements of the act, the individual would qualify for a plan in the exchange.

Individuals may also qualify if the employer provides coverage, but the single-only premium for lowest cost minimum coverage is more than 9.5 percent of the employee’s household income. In that case, Kole said, the coverage is not considered affordable.

Small businesses who offer insurance may be more aware of the changes, Kole said. The others, however, have no one guiding them.

“They’re the ones I’m concerned about the most,” he said. “They don’t offer coverage, and maybe never have, but they’re also required to provide notice.”


There will also be changes in how a small business selects coverage.

“It’s going to forever change the marketplace of buying and shopping for insurance,” Kole said.

In the past, employers could ask their employees to fill out a health survey. If the group, as a whole, was healthy, the employer could get a discount on the rate.

Health insurance ratings based on health status and gender is outlawed as of 2014.

However, when the business is given rates, they will see a break out of the rate for each individual based on age and on their smoker or non-smoker status.

Kole said he has concerns about how that break out will play out in the marketplace. Depending on how it is billed and how the costs are passed along to employees, it could lead to accusations of age discrimination.

“Nobody knows how it will stand up in court,” Kole said.

Changes have also been made to the regulations for health reimbursement arrangements. In those arrangements, the employee health care package has a high deductible rate, but that rate is reimbursed by the employer. It’s been “a great way” for group plans to lower premiums.

Now, those plans will include a “patient-centered outcome research fee” at a rate of $1 per employee per year, Kole said.

Businesses offering a reimbursement arrangement will have to file a form with the Internal Revenue Service.

“It’s another step you have to take,” he said.

Business owners also question what constitutes affordability.

“The million dollar question is ‘What’s it going to cost?’” Kole said.

Palm said he’s not getting the feeling the coverage is actually as affordable as the act intended. It may make insurance affordable to some people, but it could mean those in the middle will see a decrease in coverage.

“What’s making it affordable, and who is it affordable to?” he asked. “It’s just a great unknown.”

From his experience, Kole knows people will walk away from premiums as low as $100. The question, then, becomes what does the cost need to be to make people buy insurance?

Renewal rates are already starting to increase as the marketplace looks to take hold.

“We’ve seen in the last nine months, the average has been about 20 percent — and that’s being generous,” Kole said.

The broker who handles the insurance program at the Mechanicsburg chamber said the current program may not be offered because of the changes. An insurance plan without the same coverage may cost the same or it may be more, which Palm said penalizes the employee.

“There’s only two of us here,” he said. “Our coverage as it stands now, most likely, will not be available.”


Business owners will have the option to take part in the Small Business Health Option Program (SHOP), which is part of the Health Insurance Marketplace. Designed for businesses with 50 or fewer employees, SHOP is a place where small businesses can compare price, coverage and quality of plans.

Employers buying health insurance through the SHOP marketplace may also qualify for a tax credit to help defray their premium costs. Hundreds of thousands of small businesses with fewer than 25 full-time-equivalent employees have already received a tax credit of up to 35 percent of their contribution to employees’ health insurance premiums.

Beginning in 2014, this tax credit will be worth as much as 50 percent of the employer’s contribution to premiums and will be available only to those purchasing coverage through the SHOP.

Starting Tuesday, small businesses can begin the application process and get an overview of the available plans and premiums in their area. All functions for SHOP will be available in November, and if employers and employees enroll by Dec. 15, coverage will begin Jan. 1, 2014. Detailed information on the SHOP application and enrollment process are available at

Also starting Tuesday, a dedicated call center will offer extended hours of 9 a.m. to 7 p.m. Monday through Friday to offer assistance with small businesses’ applications.

Despite these announcements from the U.S. Department of Health and Human Services, there were reports late last week that the online system won’t be ready in time, and business owners will have to mail or fax their information for enrollment.

That uncertainty leads back to the constant questions on the minds of business owners.

“I have a feeling it’s going to be more of a hindrance than a help, at least at first, because of the lack of understanding and information about it,” Palm said.

Copyright 2015 The Sentinel. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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