Health Care Reform and Your Small Business


November 2013

Employer Mandate

Employer mandate overview
▪ Beginning January 1, 2015 employers with 50 or more FTE employees MUST offer health insurance that is:
▪ Affordable ▪ Offers minimum essential coverage OR ▪ Pay a penalty

▪ If less than 50 FTE, are not penalized if do not offer “Pay or play” mandate

Employer mandate (50 or more FTE)

Affordability – self-only coverage must not exceed 9.5% of employee household income (employer safe harbor: W2 form) Minimum value – a plan must cover 60% of plan costs (rest covered by individual via cost-sharing techniques)

Retrieved from 11/11/2013

Employer mandate - penalties

Although firm size determined by FTE, penalty is only assessed on full-time workers (30+ hours per week)


Examples of penalties

Employer mandate - penalties
Determination and application of employer penalty by type of employee

Retrieved from 11/13/2013

Employer mandate (less than 50 FTE)
Choices for “small employers”: 1. Are not penalized if do not offer  point employees to individual exchanges ( 2. Employers can buy health insurance from Small Business Health Options Program (SHOP) (“functional at the end of November”)
▪ An online exchange (much like the exchange for individuals) ▪ Could quality for tax credits to offset costs; not permanent ▪ Way of attracting new employees  increased total compensation?

3. Work with insurance company/broker to buy group coverage in private market (nothing new)

Employer mandate – more on SHOP
▪ Open to employers with 50 or fewer FTE employees
▪ In 2016 this will increase to those with 100 or fewer FTE employees

▪ Self-employed can use individual exchange, but not SHOP

▪ If offer through SHOP, must offer to all FT employees (~30 or more hours per week)
▪ At least 70% of your eligible employees must enroll in your SHOP plan ▪ Employees sign up using the SHOP webpage after you have selected a plan

▪ Coverage will not take affect until approved by employer after enrollment period is over

Employer mandate - SHOP rates in area

SHOP Rates in Roanoke/Salem area

Family – 2 adults age 30, 2 children
Single Parent Family – 1 adult age 30, 2 children Couple – 2 adults age 40, no children Plans priced by primary business location






$0.00 Adult Individual Adult Individual Age 27 Age 50 Average Family Median Single Parent Family Min Max Couple Child

Employer mandate (less than 50 FTE) - example
▪ Fleet Transportation, LLC (Alexandria, VA)
▪ Luxury transportation service ▪ Offers health insurance to each of its 25 full time employees (“moral responsibility”)

▪ Owner David Glazier reports that United Healthcare (provider) is to increase his rate by over 50% for 2014
▪ Used a broker to find a cheaper Blue Cross/Blue Shield plan, but still more than current plan ▪ He has been using a tax break for small businesses the past three years, but under ACA benefit only available to those buying from exchange ▪ Issues getting on SHOP’s site, getting information (time away from running his business) ▪ Strongly considering sending his employees to the individual exchange due to increased costs

Employer mandate (indirect effects)
▪ Uncertainty
▪ When will SHOP be “functional”?
▪ How much will insurance cost the employer?
“It’s all very confusing and it didn’t answer my main question — how much is it all going to cost?” (Washington Post, 11/7/2013)

▪ How much time/money will be spent “learning” the system? ▪ If choose to offer and use tax credit, will the benefit be affordable after credit expires?

Individual Mandate

Individual mandate
▪ Beginning in 2014, all individuals must by health insurance with essential benefits ▪ Self-employed individuals can get health insurance through the state exchanges just as any other individual ▪ If do not buy health insurance, face a penalty (unless have an exemption) ▪ Penalty is the greater of:
▪ $95 or 1% of household income over the filing threshold in 2014 ▪ $325 or 2% of household income over the filing threshold in 2015 ▪ $695 or 2.5% of household income over the filing threshold in 2016

Individual mandate – penalty example
▪ Suppose you are single and earn $40,000 per year.
▪ The filing threshold for 2014 for single individual is $10,250 ▪ The amount over the threshold is $40,000 - $10,250 = $29,750 ▪ 1% of this is ~$300
What would you do?

▪ Exchange for a single person under the age of 49 making $40,000 offer coverage ranging from $120.10/month to $1720.90/month (50 options, Roanoke)
▪ All include coverage for doctor visits, Rx, hospital, maternity/newborn care, preventative care ▪ Qualify for some aid (cut off $45,960) although Kaiser calculator says that I will pay more and not qualify for a subsidy Pay $300 in penalty or at least $1,441.20 per year in premiums (risk of penalty is low since cannot be denied coverage if get sick)

Individual mandate (indirect effects)
▪ Some individuals will have a new or higher expenditure  less disposable income
▪ Income determines personal consumption ▪ Income falls  consumption falls  demand for goods and services falls (a continuous cycle) ▪ Those businesses operating on a small margin might find can no longer cover average costs of production

Feel free to contact me – Dr. Alice Louise Kassens (540) 375-2428 (office) @RnningEconomist

The PowerPoint presentation will be available on my blog:

Thank you

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