This may come as no surprise to many business owners, but the Patient Protection and Affordable Care Act (PPACA) will likely have significant effects on small businesses, according to the Kaiser Family Foundation. It will also impact employees and their families.
Currently, just 57% of businesses with 50 or fewer employees offer health insurance coverage. This compares to 97% of businesses with 101 or more workers. That’s about to change.
Under PPACA, small businesses that wish to keep the insurance plan they currently have can do so. So-called “grandfathered” group plans are subject to fewer requirements under the ACA. For example, according to the fact sheet provided by the Kaiser Family Foundation, grandfathered plans are not required to cover preventive services without cost sharing, cover Essential Health Benefits, provide for an internal and external appeals process for contesting coverage decisions or allow direct access to an OB/GYN without referral.
If a company’s plan is grandfathered under reform (meaning that it was in place before March 23, 2010), the plan remains grandfathered even if the company enrolls new employees in the plan. Businesses wishing to keep their grandfathered plans may even change insurance carriers and keep grandfathered status if the benefits and costs to employees stay largely the same. Grandfathered plans may keep this status so long as they do not make significant changes to coverage.
The ACA includes broad changes to the insurance market for plans purchased by small businesses. Some of these changes only apply to new (non-grandfathered) plans and others apply to all plans, regardless of grandfathered status.
Here’s another change. Beginning in 2014, all health insurance plans must guarantee the availability and renewal of coverage regardless of health status. And one change you may have already heard about, young adults may remain on their parents’ plan until age 26.
As for the costs of the new law, as of 2014, premium rating based on health status will be prohibited for new (non-grandfathered) plans. Premiums for new plans will only be allowed to vary by age, tobacco use, policy type (individual or family), and geographic location. Health plans may reward participation in a qualified wellness program by providing up to a 30% discount on the cost of coverage, so long as reasonable alternatives or waivers are made available for employees with medical conditions that would preclude them from participating.
Employers, employees and their family can also expect their coverage to change. New (non-grandfathered) plans will cover a set of minimum benefits (called Essential Health Benefits) beginning in 2014. Based on initial guidance issued by the federal government, each state would determine its benefit package based on a range of benchmark plans in the state.
All plans (regardless of whether they are grandfathered) will be prohibited from imposing exclusions for pre-existing conditions (effective since 2010 for children under 19; effective in 2014 for adults).
In addition, all plans must abide by the Medical Loss Ratio. This requires plans (regardless of grandfathered status) will have to report the proportion of their income from premiums that are used on medical care and quality improvement. If this amount is less than 80%, small businesses and individuals enrolled in the plan will receive a rebate.
You may have also heard about the creation of insurance exchanges. This is essentially a marketplace set up by states where employers can compare available plans and select the best one for their business and their employees. This is called the Small Business Health Options Program (or SHOP Exchange). Each state is required to create an exchange by 2014; otherwise the federal government will run one in the state.
There are a multitude of other changes on the way for which employers should prepare. The full report by Kaiser Family Foundation is a great resource.