Under the Patient Protection and Affordable Care Act, businesses having up to 100 employees can shop for insurance at a state health insurance exchange or a federal exchange in states that have not established their own exchange. Through exchanges, it is hoped that small business will have more insurance choices in a competitive environment that will lead to lower premiums.
Exchanges will serve businesses through a Small Business Health Options Program (SHOP). A business will register at a SHOP and define the employer contribution towards the cost of health insurance. An employee can then use the SHOP to compare plans and see what costs would be after the employer contribution is made. The SHOP will send the employer a monthly bill for employer and employees. The employees will pay through payroll deduction. The employer will pay the SHOP who will pass the payment to the insurer.
Companies with up to 25 employees with average wages below $50,000 may be eligible for a small business tax credit worth up to 35% of health insurance costs.
Many businesses will have a strong incentive to use these exchanges starting in 2015 because companies with 50 or more full-time employees must provide health insurance for all workers or face stiff penalties. This penalty begins at $40,000 and increases by $2,000 for every worker above 50. Businesses obtaining coverage for employees must have benefits that cover at least 60% of medical costs. Additionally, the employee premium must be less than 9.5% of the employee’s family income. If a company provides health insurance coverage below the minimum requirement of the Affordable Care Act, they can receive a fine of $3,000 for each employee receiving a premium tax credit from the insurance exchange.
If a company has less than 50 workers then the obligation to enroll in health insurance falls on the employee not the employer. Additionally, companies with more than 100 employees will need to shop outside of health insurance exchanges for employee health insurance coverage.
Based on 2014 data for 32 states, HealthPocket found the below averages for out-of-pocket costs within small group health insurance plans.
|Medical Deductible for an individual enrollee||$4,216||$2,384||$1,278||$323|
|Medical Deductible for a family||$8,667||$4,946||$2,872||$647|
|Primary care visit||33% Co-Insurance Fee||$34||$23||$16|
|Specialist visit||33% Co-Insurance Fee||$54||$43||$29|
|Annual cap on out-of-pocket costs for an individual||$6,224||$5,690||$3,758||$1,620|
|Annual cap on out-of-pocket costs for a family||$12,518||$11,445||$7,926||$3,240|
While the Affordable Care Act does have caps on deductibles for small group plans ($2,000 individual / $4,000 family), those caps are waived if it would interfere with the plan meeting its proper ratio of insurance payments to enrollee out-of-pocket costs.
To review the full findings of HealthPocket’s research on small business health plans, see “1-in-3 Obamacare Small Business Health Plans Exceed Deductible Cap.”
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