Guest column: What Ann Arbor area small businesses need to know about federal health care reform

The ACA is intended to give small businesses and individuals access to a broader range of health care plans, contain rising health care costs and provide tax credits for employee health care premiums paid by small employers.

Smaller profit margins mean small employers are less able to absorb increases in health care premiums, leaving their employees especially vulnerable to rising health care costs. The Employee Benefit Research Institute estimates that approximately 50 percent of uninsured Americans are small business owners, employees or their dependents.

Insurance Exchanges

The ACA builds upon the existing employer-based health insurance system by introducing State Insurance Exchanges that will allow small businesses and individuals to join together for increased negotiating power and access to expanded plan options.

Although the U.S. Supreme Court is currently considering whether to uphold the law and could strike it down, small businesses must still prepare for the law's implications so that they're not caught off guard.

By 2014, every state must have its own Small Business Health Options program or “SHOP exchange,” or one set up by the U.S. Department of Health and Human services. Legislation is currently pending in Michigan for a state-established exchange. Businesses with 1 to 100 employees will qualify for participation in the SHOP Exchange small group market. Exchanges will offer four categories of insurance packages based on the percentage of cost each plan will cover:

--Bronze = 60% --Silver = 70% --Gold = 80% --Platinum = 90%

Each level will include a minimum benefit requirement for plans offered. Employers may choose what level of coverage to offer, allowing employees to choose any plan within the exchange at that level. The Department of Health & Human Services has launched www.HealthCare.gov to offer information about coverage options available in each state.

Cost Containment

Under the Affordable Care Act, small businesses will see decreasing premium costs. The ACA requires that 80% of the premium for small group and individual plans be spent on care, rather than administrative expenses, limiting administrative overhead. The ACA also imposes limits on cost-sharing within plans at each coverage level, including a $2000 limit on deductibles for individuals ($4000 for families), and eliminates cost-sharing on preventive services and caps on the dollar value of services.

The ACA also promotes prevention and wellness programs to reduce the likelihood of preventable health conditions requiring costly treatment later in life. Grants will be made available through the Department of Health and Human Services for small employers that introduce evidence-based workplace wellness programs, such as healthier on-site food options or flextime to allow employees to be more physically active.

Tax Credits

Businesses with fewer than 25 employees, average wages below $50,000 and which pay at least 50% of the premium cost will also be eligible for tax credit that will save an average of $1000 per employee. In 2010, approximately 1.2 million businesses were eligible for the maximum credit. To calculate your credit, the Small Business Majority offers an online credit calculator.

Shared Responsibility Requirement

On Jan. 1, 2014, the shared responsibility provision will take effect, requiring some employers to pay a penalty per each full-time employee for whom the employer’s coverage is unaffordable, who receives government assistance and buys coverage in an exchange.

However, most small businesses will be exempt from a penalty if they don’t offer health insurance and those with fewer than 50 full-time employees are not subject to the provision. Businesses with 50 or more employees but no employee who receives an individual premium tax credit or cost-sharing reductions (both based on income) will not be required to pay a penalty, regardless of whether they provide insurance.

If an employer does offer coverage, and at least one full-time employee receives a premium tax credit or cost-sharing reductions, the employer will be required to pay $3,000 for each employee who receives assistance or $2,000 per full-time employee (not counting the first 30 employees), whichever is less.

For more information about how the payment is calculated, visit the Small Business Majority’s Health Coverage Guide.

The A2Y Chamber regularly hosts informational events on community issues. Next up is a Community Conversation on Michigan’s pre-K-12 Education System from 6-8 p.m. March 28 at Sandler Training in Ann Arbor. See more information here.