By Sonia Sekhar
Center for American Progress
Our current health care system creates particular challenges for small businesses. But the new Patient Protection and Affordable Care Act provides various forms of relief for small businesses that often struggle to pay for their employees’ health coverage. In fact, recent guidance released by the Department of Treasury—included in this updated calculator— broadens the supports that small businesses are eligible for under PPACA.
Small businesses spend about 18 percent more on average than large businesses for comparable health policies. This is largely due to high administrative costs, which can be up to 30 percent of premiums, their limited ability to spread risk because of these businesses’ small scale, and a lack of market power when negotiating rates with insurers.
One-third of workers at firms with fewer than 25 employees are uninsured. High uninsurance rates among small-business employees partly reflect the fact that their employers are less likely to offer coverage, especially at the smallest firms that pay the lowest wages. Firms with fewer than 10 employees that pay low wages (in the bottom quartile) had a coverage offer rate of 18.4 percent in 2008, compared to the national average of 56.4 percent. Overall employer-sponsored coverage offer rates have declined by nearly 5 percent over the past decade, but the decline for small businesses was significantly steeper at 21 percent for firms with 10 to 24 workers and 28 percent for firms with fewer than 10 workers.
The recently passed Patient Protection and Affordable Care Act makes substantive improvements to our health care system that will better provide small business employees access to affordable, quality health coverage. The new health reform law provides certain small businesses with a tax credit to help pay for coverage in the years leading up to the establishment of state health insurance exchanges in 2014, and for two years once the exchanges are established. The state health exchanges will have further reformed insurance market rules, which will provide small businesses with a new avenue for purchasing coverage. And if small businesses decide not to offer coverage, lower-income employees will likely receive subsidies to purchase coverage within the exchange.
This calculator will help small business employers determine the premium subsidies for which they are eligible in the years leading up to the establishment of the state health exchanges (2010-2013), and once the exchanges are established (2014).
Patient Protection and Affordable Care Act and small business
PPACA provides small businesses with a tax credit of up to 35 percent of the employer’s share of the cost of health expenses from 2010 to 2013, and up to 50 percent of expenses once state health insurance exchanges are operational in 2014. These credits are offered on a sliding scale for small businesses, those with up to 25 employees whose average earnings do not exceed $50,000 a year and pay at least half their employees’ health expenses. Based on recent guidance from the Department of Treasury, small businesses will be able to include their traditional health insurance costs and any add-on dental, vision, and other limited-scope coverage, as long as they pay at least half of the premium. The smaller the firm and the lower its average wages, the larger the share of premiums the tax credit will pay. The treasury also clarifies that small businesses will see no reductions in their federal credit even if they also receive state credits or subsidies for health insurance payments.
Sonia Sekhar is a Resesarch Assistant for Health Policy at the Center for American Progress
Thursday, June 10, 2010
Interactive Calculator: Health Reform Helps Small Businesses
Friday, June 4, 2010
New rule will limit number of plans an employer can offer
Small employers will have their ability to buy multiple health insurance plans for employees curtailed in the next few months. Currently, many small employers choose to offer their employees more than one health insurance plan. This might be a lower cost HMO and a more expensive point of service (POS) plan with an out-of-network option.
The rule change made by the New Jersey Small Employer Health Coverage Board (SEH) would restrict small employers’ purchasing options to as few as just one health insurance plan, unless a health insurance carrier opts to allow the small employer more options.Specifically, the board voted to require health insurance carriers to issue only one health insurance plan, of the many they offer, to a small employer. It will be the health insurance carrier’s option to choose to sell more than one plan. Health insurance carriers will still offer a variety of plans, but the new rule will limit how many of these plans an employer could choose to offer its employees.
I am interested in your comments on this new policy. Does your company currently offer more than one plan to employees? If yes, are the plans issued by the same carrier or different carriers?
Please share your comments with me via e-mail at cstearns@njbia.org or by calling me at the office (609) 393-7707 x-260. I look forward to hearing from you.
Tuesday, June 1, 2010
Health Care Reform and Employer Sponsored Wellness Programs
Sweeping health care reform was signed into law by President Barack Obama on March 23, 2010. The health care reform law contains new provisions regarding wellness programs that will hopefully result in renewed and increased interest in such programs. Two such provisions may be of particular interest to employers and employees:
• Beginning in 2011, certain smaller employers can take advantage of a $200 billion grant program for assistance in establishing wellness programs.
• Currently, an employer may offer a reward to an employee for participation in a wellness program worth up to 20% of the cost of coverage under the employer’s health insurance plan. As of 2014, the maximum reward permitted will rise to 30% of the cost of coverage. That percentage may even be raised to 50%.
This latest attention to wellness programs should serve as further incentive for employers to establish such programs, which generally contribute to an employer’s financial well-being. According to one study, wellness programs may save an employer over $3 for each $1 dollar spent on a program. Therefore, the present time is as good a time as any for employers who currently offer wellness programs, or who plan to begin offering such programs, to review the law regarding legally viable programs to be sure they are considered “nondiscriminatory.” The following is a brief summary of the requirements of a nondiscriminatory wellness program.
The first step an employer must take is to determine whether its wellness program is subject to the nondiscrimination rules to begin with. If the wellness program is not a part of the group health plan offered by the employer to its employees, the program is not subject to the nondiscrimination rules (although it may still be subject to other federal and/or state laws). The employer also must consider whether the wellness program discriminates on the basis of a “health factor.” A health factor means, among other things, a medical condition, medical history, or disability. If an employee must meet a standard related to a health factor in order to receive a reward under the wellness program, such as a discount on the employee’s health insurance premium, then the program discriminates on the basis of a health factor. An example would be a wellness program that provides a waiver of insurance premiums for employees whose cholesterol is under a certain level.
If an employer’s wellness program does not relate to the employer’s group health plan or does not discriminate based on a health factor, the nondiscrimination rules do not apply. Assuming that the rules do apply, though, the employer must take the next step of determining whether its wellness program complies with the rules. In order to comply with the nondiscrimination rules, a wellness program must have the following characteristics:
• The reward offered to employees under the program must not exceed 20% of the cost of health coverage. (Remember that this figure will rise to 30% or higher in 2014.)
• The program must promote health or prevent disease.
• Individuals who participate in the program must be given a chance to qualify for the reward offered under the program at least once per year.
• The reward offered under the program must be available to all “similarly situated individuals.” Also, the program must offer a reasonable alternative method for obtaining the reward to a person for whom it is unreasonably difficult or medically inadvisable to attempt to meet the program’s general standard.
• The program must disclose the availability of a reasonable alternative of obtaining the reward in all materials describing the program.
By tailoring wellness programs to comply with the above rules, employers can offer their employees a healthy and constructive means of saving money, while also benefitting financially in their own right. With health care reform providing for greater rewards than ever before, now is the time for employers who have not yet taken the wise step of implementing a mutually beneficial wellness program to strongly consider doing so.
The above merely summarizes and paraphrases certain portions of the law concerning employer sponsored wellness programs and does not constitute legal advice. The statutes and regulations governing wellness programs are complex. Employers should always consult legal counsel when constructing and implementing such programs.
