Small employer health benefits options: evolving with the affordable care act.

• Author: Barbour, Tracy
• Position: INSURANCE

The health insurance landscape is constantly evolving under the federal law designed to ensure that Americans have access to quality, affordable healthcare. Rule changes, rising costs, shifting trends, and other factors are converging to uniquely shape the health benefits options of small employers in Alaska and everywhere else.

The Patient Protection and Affordable Care Act, often called the Affordable Care Act (ACA) and "Obamacare," was signed into law 2010, with its implementation taking place in stages. As the healthcare reforms unfold, it's important for employers to understand the ACA and the options that are available to their company and employees. "It's evolving and dynamic--and it's changing so quickly," says Northrim Benefits Group President Joshua Weinstein.

Obligations for Employers

Employers' responsibilities vary primarily according to size under the ACA. Currently, large companies--those with fifty or more full-time equivalent (FTE) employees--must provide affordable minimum essential health insurance. In general, eligible employer-sponsored plans--such as group health insurance and self-insured plans-qualify as minimal essential coverage. The ACA defines an FTE as a person who has worked an average thirty hours per week during the previous calendar year--including time paid for vacation and leave. Large employers who fail to provide adequate coverage for employees and their dependents will have to pay an Employer Shared Responsibility ("play-or-pay") tax penalty.

Small employers, those with fewer than fifty FTE, are not required to provide health insurance coverage. However, those that do so with fewer than twenty-six employees can claim a tax credit for up to 50 percent of premium costs.

As a significant development, the size of the small group market will be expanding from one to fifty employees to one to one hundred employees next year. The ACA defines a small employer as one with up to one hundred employees, but the law has allowed states to use a definition of up to fifty employees until the end of 2015. As a result, most states have characterized a small employer as one with up to fifty employees. However, that will change on January 1, 2016, when the ACA will require all states to classify their small group market as up to one hundred employees.

So why is this significant? It's important because the ACA imposes certain rules on employers in the small group market. For example, small group plans must cover ten essential health benefits: outpatient care, emergency room, inpatient care, maternity and newborn care, mental health and substance use disorder services, prescription drug coverage, rehabilitative and habilitative services, laboratory services, preventive and wellness services, and pediatric services.

Grandfathered plans--those already in place before the ACA became law on March 23, 2010--are exempted from certain provisions of the law and may not comply with ACA requirements for essential minimum coverage.

Insurance carriers are applying different approaches to grandfathered plans. Moda Health, for example, doesn't offer any noncompliant grandfathered plans, according to Alaska General Manager Jason Gootee. Premera Blue Cross Blue Shield of Alaska says it intends to offer grandfathered non-ACA plans indefinitely. "Our rationale is to maximize the choices available to consumers in Alaska," President Jim Grazko explains.

Small group plans under the ACA are also required to provide coverage for certain expenses and be classified as bronze, silver, gold, or platinum. And no rate increases for medical history can be applied to small group health plans. Also, small group plans must use adjusted community rates, which means each employee will be charged a different rate which can only vary by age, family size, geographic location, and tobacco usage.

The reclassification of the small group market will also significantly impact companies with fifty-one to one hundred employees. These employers have generally been bound by large group market...