5 New Facts of Life for Every Business

Victoria Braden is the CEO of Braden Benefit Strategies, Inc., an Atlanta-area consulting firm that’s been on overdrive lately as it helps clients interpret what health care reform means for their businesses. She spoke with NY Report Managing Editor Lee Lusardi Connor about some of the bill’s fundamentals—and some basic misconceptions.

Here’s Braden’s advice to small business owners:

It’s true that businesses with fewer than 50 employees are not mandated to provide health insurance. In fact, no businesses are. However, beginning in 2014 businesses with more than 50 employees who do not provide it face certain repercussions. 

That doesn’t mean, however, that firms with fewer than 50 employees don’t have to educate themselves about the provisions of the healthcare reform act. Small businesses need to take action on certain provisions right now, with others rolling out over the next few years. Provisions that affect all businesses include:

Already in effect

Required Health Insurance Policy Coverage

If your business does currently provide insurance for your employees, when you renew your plan you must provide coverage according to the new government standards, which include:

• Dependent coverage for adult children up to age 26
• Elimination of lifetime limits
• Elimination of pre-existing condition exclusions on children age 19 or younger
• Preventative care must be 100 percent covered by the insurance company with no cost sharing

The only exception to these changes for 2011 is if you are “grandfathered” out. To do this, you can’t change carriers or the coverage you are currently providing, or make more than minimal changes in co-pays and deductibles.

Tax credits to alleviate the cost for eligible small businesses are available. (See the IRS web page at irs.gov and follow the “Affordable Care Act Tax Provisions” link for a calculator to see if your business qualifies.)

As of 2011:

Changes in what’s covered by Flexible Spending Accounts

Over-the-counter drugs will not be considered a covered expense under a health Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), or Health Savings  Account (HSA) unless prescribed by a doctor. OTC drugs excluded under this provision include many categories, from allergy and sinus products to digestive and sleep aids. Check the IRS site (irs.gov) for details.

Businesses must track employee premium costs

For each employee’s 2011 W-2 form, employers will have to report the cost of the employee’s medical insurance for that year (including costs paid by the employer and the employee). The stated reason is the government wants to track what a plan costs in different sections of the country. Obviously, if you have a great plan, it’s not going to cost the same in the South as in the Northeast.

Keeping track of this data will need to be systematized because there are so many possible changes over the course of a year.

For example, the premium will change at renewal, the status of the employee may change (for example, because of divorce or a new child), and the employee may be new or terminated during the calendar year. Because of these variables, it won’t be possible for a payroll service to handle the responsibility for a small business. We are telling our clients to keep track of everything on a simple spreadsheet.

Every employee must be offered government long-term care insurance

By 2011, the government will establish a voluntary insurance program for purchasing community living assistance services and supports (the CLASS program). Like Medicare, this insurance is offered by the government and paid for by the employee through a payroll deduction. Employers must automatically enroll all employees and give them the ability to opt out.

As of 2013:

All employees in a business must have the same kind of coverage

The so-called Section 105 Rules mean that, beginning in 2013, employers of any size may no longer allocate different medical premium payments to any one class of full-time employee. (“Full-time employee” is defined as someone working 30 or more hours per week.)

For example, let’s say a company with 40 employees organizes them into three classes: management, administrative, and hourly. The company does not offer health insurance coverage to hourly employees; it offers coverage to the administrative staff and pays 50 percent of the individual employee premium. The management class is also offered insurance; however, the company pays 50 percent of both employee and dependent premiums.

Beginning in 2013, all employees must be treated the same. This could result in decreased coverage for management employees or increased coverage for other employees. Most likely the employer will settle on a plan somewhere in the middle.