Small Groups will be eligible to buy insurance on the Exchange through a SHOPs (Small Business Health Options Programs) starting in January 1, 2014. A small group is currently defined as a group with less than 50 equivalent full time eligible employees. This number will change to 100 full time eligible equivalent employees on a state by state basis starting in 2014 to 2016. Each state can choose when they will move to the 100 full time equivalent rule. There is not any information on the small group exchange currently available (As of June 2013). We have not been told which companies will be available, types of plans or premiums. I will update this post when the criteria has been determined.
Small groups are not subject to any penalties for not offering care or failing to meet the minimum benefit and premium guidelines. Employees may go and purchase plans through the individual Exchange regardless of if the small group is offering benefits or not.
In order to determine the number of full time employees, seasonal and part time workers must also be taken into consideration. Assume an employer has 20 full time employees and 40 part time employees, each of whom averages 90 hours of service per month. Each of the 20 employees averaging 35 hours of service per week are counted as full time employees. To determine the part time employees take the total hours of service of the part time employees (90) multiply by the total number of part timers and then divide by 120. (90 x 40 divided by 120 =30) This means that the employer has 30 extra full time employees for a total of 50 employees.
Small groups with less than 25 employees are currently eligible for a 35% premium tax credit. The credit is 35% of the monthly premium the employer contributes toward the health insurance costs. This number will move to 50% in 2014. In order to be eligible for the tax credit, groups must fall within the following guidelines.
- Fewer than 25 full time equivalent employees
- Average employee wages of under $50,000 annually
- Employer must cover at least 50% of the cost for health insurance.
Groups will only be eligible for the tax credit when they purchase insurance through the SHOP exchange. Groups are not eligible if they purchase a plan directly from an insurance carrier. (Insurance carriers will still be offering plans) Only small business owners and small business employees will be able to purchase insurance through a SHOP plan.
Other Options –Small groups that want to continue offering standard group employee coverage can certainly do so. The negative is that health reform is likely to drastically increase small group rates (outside of the SHOP) in 2014. Estimates range from 20% to 50% on top of the normal renewal. Such increases will make it difficult for many small group employers to continue offering standard small group insurance plans. As a result, many small group employers will use the SHOP plans or have their employees simply buy on the individual exchange.
Alternate funding methods may also come in to play in 2014. Small groups do have the option of experience rating their groups which would circumvent many of the health reform mandate rules and avoid the drastic rate increases as a result.
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