Small businesses with fewer than 50 full-time equivalent employees are not required by the Affordable Care Act (ACA) to provide health insurance for their employees and there is no penalty for small businesses.
However, we know attracting and retaining top talent is crucial for the growth of your business. As a small business owner investing in your business now will prepare you for the future and that’s one of the reasons you provide health insurance for your employees. The ACA has had a significant impact on the health plan designs, managing benefits, and the cost of health care for all small businesses offering health benefits.
Some of the key changes which have impacted small business costs and health plans are:
The ACA contains mandates for health plans regarding pre-existing conditions, lifetime benefit limits, health benefits covered, dependent coverage, and more.
The ACA stipulates that an employee eligible for benefits under a group health plan cannot have a waiting period of more than 90 calendar days before their coverage begins. The 90-day waiting period limit went into effect on January 1, 2015. The rule applies to both non-grandfathered and grandfathered health plans.
The Medical Loss Ratio (MLR) was established by the ACA to help control health care costs and ensure members receive value for their health care premiums. The MLR rules require health insurance issuers to spend 80-85% of their premium dollars on medical care and health care quality improvement. These rules went into effect on January 1, 2011 and apply to insurance carriers offering group or individual health coverage. Insurance issuers who do not meet the MLR standard are required to provide rebates to members.
Small businesses are able to receive a tax credit when offering health insurance to their employees that is purchased through the Small Business Health Program (SHOP). The SHOP is designed to make coverage more affordable for small businesses who qualify for the tax credit while allowing them to choose from a variety of health plans. To be eligible for the credit your business must have fewer than 25 full-time employees, average employee pay must be less than $50,800 a year, and the employer must contribute at least 50% of the employee’s premium cost, including dental and vision coverage offered.