Health reform: The basics for small businesses

It’s complicated.

That’s one thing that everyone can agree on about health reform. But as new provisions of the Patient Protection and Affordable Care Act (PPACA) begin to go into effect, many small business owners still have more questions than answers.

Am I required to provide insurance to my employees?

What are my options? Can I get financial assistance to pay for coverage?

How will keeping or dropping insurance coverage affect my company’s bottom line?

To help small business owners address these and related issues, Blue Cross Blue Shield of Michigan recently participated in a webinar hosted by the Detroit Regional Chamber of Commerce. Following are some of the highlights from this presentation, which focused on the transformation of the insurance marketplace for companies with fewer than 50 employees, along with other pertinent information to prepare you for the changes ahead. (For more details, here are the slides from the webinar)

Small Business: Definition and Penalty Exclusions

For many health insurance provisions, the federal government’s definition of small group effective January 1, 2014 will be 1-50 employees, which includes full-time, part-time and seasonal employees. Penalties in the form of an excise tax will not be imposed on employers with fewer than 50 employees who decide not to offer coverage.

Insurance Exchanges

According to federal government data, small businesses lack the purchasing power of larger companies and on average pay about 18% more than large firms for the same health insurance policy. The PPACA requires states to offer Insurance Exchanges, which are intended to close that gap.

An Exchange is essentially a competitive marketplace of qualified health plans. It allows small employers and individuals to directly compare available private health insurance options on the basis of price, quality and other factors. Exchanges also enable individuals to enroll in health plans and “de-link” their coverage from employment, thus making it portable when people change jobs.

Michigan is expected to have a state-federal partnership exchange in 2014. Open enrollment begins on Oct. 1, 2013 for coverage effective on Jan. 1, 2014. Rolling enrollment is available through the year to allow an open enrollment period that coincides with the group’s plan year.

Tax Credits

If you have fewer than 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of your insurance.

Planning Ahead

What’s the right health insurance strategy for your business? Should you continue to offer employer-sponsored health coverage to your employees?

Several factors will affect your decision, and timing is critical because of downstream impacts to your business model and your employees and their families. The Blues can provide scenario-based planning support to help you make smart choices and offers a comprehensive process to assist in transitioning employees to a BCBSM individual plan.


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