Do you own a flower shop, a tech startup or other small business and have no idea how to shop for health insurance? The Affordable Care Act might make it easier and cheaper to get coverage for your employees.
However, small businesses with fewer than 50 full-time employees or the equivalent can choose not to offer coverage without getting hit with a fine -- also called an employer shared responsibility payment.
“Many small-business owners still think the employer mandate applies to them,” says Christina Merhar, content manager for health insurance consulting company Zane Benefits. “It doesn’t.”
The basics of small-business health insurance
Very small businesses might not need to worry about fines, but starting in 2016, companies with 50 to 99 full-time employees must provide health insurance or get fined.
And larger employers with 100 or more full-time or full-time-equivalent employees will have to provide coverage or pay up starting in 2015.
If you need coverage but don’t have it, there’s good news: Unlike individual consumers, who can buy health insurance only during open enrollment periods, small-business owners can shop for small group plans at any time.
So, if you want to buy coverage, where do you get it? Small-businesses owners who have fewer than 50 employees and want to provide coverage can shop now for small group health insurance in the Small Business Health Options Program (SHOP) marketplace in their state.
Starting in 2016, businesses with 100 or fewer employees also will be able to use the SHOP marketplaces.
However, self-employed solo business owners may not buy insurance in the SHOP marketplaces, but may purchase individual insurance in their state’s marketplace, according to HealthCare.gov.
Should you shop the SHOP Marketplace?
So, should you shop the SHOP marketplace -- or look elsewhere? For now, experts say shopping outside the marketplace will offer business owners more options.
“You can get the exact same plans outside the exchange, and there still are several headaches with the exchange,” says Susan Combs, president of New York-based brokerage Combs & Company.
For example, the SHOP exchange puts limits on a broker’s administrative control, Combs says, so employers -- or their HR employees -- sometimes end up doing tasks, such as adding a new employee to the system, that otherwise could be done by a broker.
But, if you qualify for tax credits, you can’t get them unless you buy your insurance through the SHOP marketplace, she says.
Does your business qualify for tax credits?
You might qualify for tax credits if your business has fewer than 25 full-time equivalent employees and they make an average of $50,000 a year or less, according to HealthCare.gov. In addition, you need to pay at least half of the health insurance premium cost for your full-time employees.
HealthCare.gov offers a tax credit tool small-business owners can use to see whether they are likely to qualify for tax credits, which can cover up to 50 percent of the amount paid toward employees’ health insurance premiums.
The main disadvantage of going through the SHOP exchanges is lack of choice -- at least for now. Due to a decision by the U.S. Department of Health and Human Services, most SHOP exchanges will offer just one plan in 2014. Starting in 2015, though, SHOP exchanges should offer many more choices.
How to choose the right health insurance plans for your employees
Need help choosing the right coverage? Here are five expert tips for small-business owners considering buying health insurance.
1. Consider defined benefit contributions.
One option for small employers who can’t afford traditional health insurance: Reimburse employees a set amount toward individual health insurance, Merhar says.
For example, an employer could choose to kick in $250 a month toward each employee’s premium, or could set different allowance amounts based on the type of job, she says.
ACA provisions also allow an employer to set up a similar arrangement with small group plans in the SHOP exchanges, according to Jeffrey Ingalls, president of the insurance consulting firm The Stratford Financial Group, and author of the book “Healthcare Reform Made Easy.”
2. Find and use a good broker.
Seek out the services of a broker who can explain the ins and outs of different plans to you and your employees, Merhar recommends. You can also ask for a referral from another business owner in your industry or use NAHU’s search tool, Combs says.
If you have a lot of variable employees -- such as seasonal workers -- and worry you could get hit with a penalty, consider using a broker who is PPACA-certified by NAHU, which means they have 40 hours of training and have passed 10 tests on the ACA, Combs recommends.
In most cases, a small-business owner won’t have to pay for the service because brokers typically are paid on commission from health insurance companies.
3. Look at plan provider networks first.
When Combs works with a small business, she typically starts by asking the employer for a list of employees’ doctors. The employer can get this information by giving each employee a chart with space to fill in doctor names, specialties and phone numbers.
The employee can turn the chart in at work or mail it back to the employer without putting their name on it if they want to, Combs says.
It’s smart to look only at plans that have extensive provider networks that include your employees’ doctors, she says. Also, if you have brand-name drugs that you want to make sure are covered in a certain way, check the drug benefit details ahead of time, she says.
Taking a survey is a good way to get employee input anonymously, Combs says.
4. Consider employee health care needs.
It’s a good idea to talk to your employees -- or have your broker do so -- to get details about their health care needs, Combs says. For example, do you have an employee who was diagnosed with cancer or five employees who are pregnant?
“If there are going to be five babies born this year, then maybe you want to go with a richer plan where employees pay only $500 to go into hospital rather than a $2,000 deductible,” she says.
5. Make sure your employees understand the plans.
If your company is so small that you don’t have a human resources department -- or your HR manager is extremely busy -- you can ask your broker to hold an enrollment meeting with your employees to field questions and explain coverage, Combs says.
One of the biggest mistakes employers make is to not fully understand what they’re buying -- or fail to make sure their employees are clear on plan details, she says.