Healthcare Reform Changes for Small Employers up to 25 FTEs

Health insurance is going through unprecedented changes because of the Affordable Care Act.

As a small business owner, it is important for you to learn about the changes so you can make decisions that are in the best interest of your business and your employees.

These changes go into effect for products you can start purchasing on October 1, 2013, for a January 1, 2014, effective date.

To help you get prepared, we’ve outlined five key areas where things are changing for businesses with 1-25 employees.


Expanded Benefits

What is it?

All non-grandfathered plans must include certain benefits to ensure small businesses offer comprehensive coverage that is similar to individual coverage.

How does it work?

All non-grandfathered small business plans with an effective date of January 1, 2014, or later must include the following:

  • Preventive Benefits
    • Annual checkup and other preventive care such as vaccines and cancer screenings provided at no out-of-pocket costs
    • Out-of-network preventive care can have a cost share
  • Essential Health Benefits
    • No annual and lifetime dollar limits for the following 10 required coverage categories:
      1. Ambulatory patient services (outpatient)
      2. Emergency services
      3. Hospitalization
      4. Maternity and newborn care
      5. Mental health and substance use disorder services, including behavioral health treatment
      6. Prescription drugs
      7. Rehabilitative and habilitative services and devices
      8. Laboratory services
      9. Preventive and wellness services and chronic disease management
      10. Pediatric services, including oral and vision care
  • Annual Plan Deductible Limits
    • $2,000 single and $4,000 family
    • Amounts will be adjusted for inflation yearly
    • Limits apply only to the in-network deductible
  • Out-Of-Pocket Maximum Limits
    • Maximums capped at the same level as the caps on HSA qualified high-deductible plans
    • All member cost-sharing must apply to the out-of-pocket maximum
    • Limits apply only to the in-network out-of-pocket maximum
  • Metal-Limit Plan Designs
    • Plans must meet the actuarial value of the four metal plans – bronze, silver, gold or platinum
    • Essential health benefits must be included but copayments, coinsurance, and deductibles may vary

Type of Plan

What It Covers

You Pay

Premium Cost
BronzeBronze 60 percent of
the medical costs
40 percent of
the medical costs
SilverSilver 70 percent of
the medical costs
30 percent of
the medical costs
GoldGold 80 percent of
the medical costs
20 percent of
the medical costs
PlatinumPlatinum 90 percent of
the medical costs
10 percent of
the medical costs


Under umbrella


Am I Required to Provide Health Insurance?

Businesses are not required to offer health insurance.

However, employers with at least 50 full-time or full-time equivalent employees may be penalized starting in 2015 if they have at least one employee who qualifies for a subsidy and purchases insurance on the Health Insurance Marketplace. Learn more.



New Rating Rules

What is it?

Insurance companies must start using adjusted community rating to determine premiums for small business 1-50 plans with a January 1, 2014, or later effective date.

How does it work?

Adjusted community rating allows the following guidelines to determine group premiums:

  • Geographic area
  • Small age bands
  • Tobacco use
  • Individual or family coverage

The following can no longer be used to determine group premiums:

  • Industry
  • Gender
  • Health status
  • Medical history
  • Claims experience

These guidelines must also be followed:

  • Removal of pre-existing conditions
  • Guaranteed availability and renewability of coverage (guaranteed issue)
  • No medical underwriting

What is a Small Group?

In Iowa and Nebraska, a small group is currently defined as a group with up to an average of 50 total number of employees, including part-time and seasonal employees.

In 2016, a small group will expand to a maximum of 100 employees in Iowa and Nebraska.



SHOP Exchange

What is it?

An online Health Insurance Marketplace that allows employees of a small business (1-50) to purchase insurance starting October 2013. SHOP stands for Small Business Health Options Program.

How does it work?
  • The original concept for SHOP allowed small business employees to choose from a variety of health plans offered by different companies, much like the Health Insurance Marketplace for individuals and families
  • In March, the U.S. Department of Health and Human Services announced that small business employees will not be able to choose from different plans when SHOP initially opens; instead, a small business will choose one health plan on SHOP and ask its employees to enroll through SHOP
  • By 2015, SHOP is expected to have the infrastructure in place to allow employees from a small business to choose from a variety of plans selected by its employer
  • Through technology, all of the plans chosen by a small business employer will “roll up” to one overall premium for the business
  • A business can choose when to hold its open enrollment on SHOP as SHOP is open year around
  • Employees will have 30 days to enroll in the health plan selected by their employer
  • Enrollment deadline is the 15th for a first-of-the-month effective date (i.e., enrollment deadline is March 15 for an April 1 effective date)
  • Plans must follow the “metal” levels



New Taxes and Fees

What is it?

Several new taxes and fees go into effect to help fund some of the Affordable Care Act requirements.

How does it work?

The following fees will be included as part of the premium:

Name of Fee What It Funds Amount of Fee
Patient-Centered Outcomes Research Institute (PCORI) Fee Comparative effectiveness research of medical treatments
  • $2 per covered life in 2013
  • Adjusted each year based on medical inflation through 2019 (fee ends in 2019)
Insurer Fee Premium tax subsidies for individual and family plans purchased on the Health Inusrance Marketplace
  • Annual, permanent fee starting in 2014
  • Based on the market share of the health insurance company
Transitional Reinsurance Fee Provides rate stabilization to new individual and family plans sold on and off the Health Insurance Marketplace
  • Temporary fee collected from 2014-2016
  • Assessed on a per capita basis
Risk Adjustment Fee Helps fund the cost of running the Risk Adjustment Program (helps level the playing field against adverse selection)
  • Annual, permanent fee starting in 2014
  • Estimated to be about $1 per member per year
Excise Tax (also called the Cadillac Tax) Taxes “high value” health insurance plans
  • 40 percent tax for plan values that exceed $10,200 for individuals and $27,500 for families
  • Begins in 2018
New Taxes and Fees

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