The Ultimate Guide to ACA Compliant Health Insurance for Small Businesses

What Do Small Businesses Need to Know About The Affordable Care Act?

Since it was signed into law in 2010, the Affordable Care Act (ACA) has been a topic of discussion for businesses of all sizes. For many small businesses, these conversations typically focus in on the Employer Mandate, and the type of health plan employers need to offer their employees to avoid IRS penalties. The ACA employer mandate requires Applicable Employers (ALEs) to offer Minimum Essential Coverage (MEC) to at least 95% their workforce that is Affordable and meets the Minimum Value (MV) requirements or face fines up to $2,880 per employee (IRS Penalty 4980H(a)).

Complying with the ACAs Employer Shared Responsibility Provisions:

According to the Affordable Care Act’s Employer Mandate (commonly referred to as the Employer Shared Responsibility Provisions (ESRPs)), employers are required to offer employees coverage that meets the ACAs affordability and minimum value standards to at least 95% of their full-time employees (those who work an average of 30 or more hours per week) and their dependents.

Affordability:

As of 2023, a health plan is considered "affordable" if the portion of the monthly premium payed by employees in the lowest-cost plan offered by the employer is less than 9.12% of your household income.

Minimum Value:

A health plan offered to employees must pay for at least 60% of the covered medical expenses, does not exceed the ACAs maximum out-of-pocket costs, while also covering the 10 Essential Health Benefits set forth by the ACA. These benefits include:

1. Ambulatory patient services
2. Emergency services
3. Hospitalization
4. Maternity and newborn care
5. Mental health and substance use disorders
6. Prescription drugs
7. Rehabilitative services and devices
8. Laboratory services
9. Preventive services & chronic disease management
10. Pediatric services, including oral and vision care

Avoiding ACA Penalties from the IRS:

Ensuring your business is ACA compliant requires you to do more than simply offer your employees a Qualified Health Plan. In reality, the most important steps in avoiding ACA penalties is actually ensuring your business is properly reporting the necessary information to the IRS. Key steps to ensuring this is done properly include the following:

1. Report information about the coverage you offer to the IRS: Employers subject to the ACA's employer mandate must file Forms 1094-C and 1095-C to report information about the coverage they offer to each employee. This information is used by the IRS to verify compliance and determine whether penalties apply. Learn more about ACA IRS filings here.
2. Respond promptly to any IRS inquiries: If the IRS contacts you regarding your compliance with the ACA, it is important to respond promptly and provide accurate information.

Aligning on an ACA Compliant Health Benefit For Your Team

When it comes to aligning around a health plan for your employees, the first step is to sit down with your team to gain an understanding of the health needs required by your employees. Equally as important, is for your team to have an understanding around how much you’re able to spend, the plans cost structure, what the expected utilization of the plan will be, and the level of effort your team is planning on devoting to this project.

Evaluating Available Health Plan Options:

Once you’ve aligned on the above items as team, you can now start to evaluate the different types of health plans available that meet your needs. Before starting your search, it’s crucial that you have a clear understanding of the different types of coverage available to employers. Included below is a comprehensive list of the available plan categories you could offer your employees.

1. Health Maintenance Organizations (HMO): HMO plans typically have a lower premium than other types of plans, but employees must receive care from providers within the HMO network.
2. Preferred Provider Organizations (PPO): PPO plans offer more flexibility than HMO plans, allowing employees to choose their healthcare providers both inside and outside of the network.
3. Level-Funded Health Plans: Level-funded plans are a type of self-funded plan that includes a level monthly payment that includes both the administrative and claims funding components.
4. Self-Funded Health Plans: Self-funded health plans allow employers to assume the financial risk for providing healthcare benefits to employees, rather than purchasing a fully-insured plan from an insurance carrier.
5. Point of Service (POS): POS plans are a hybrid of HMO and PPO plans. Employees must choose a primary care physician within the network but can see out-of-network providers with a referral.
6. High Deductible Health Plans (HDHPs): HDHPs have lower premiums than traditional plans, but employees are responsible for a higher deductible before the plan begins to pay for care. HDHPs are often paired with a Health Savings Account (HSA).
7. Exclusive Provider Organization (EPO): EPO plans are similar to PPO plans, but employees must receive care from providers within the EPO network.
8. Consumer-Directed Health Plans (CDHPs): CDHPs are high-deductible plans that are often paired with a Health Reimbursement Account (HRA) or Health Savings Account (HSA). These accounts allow employees to set aside pre-tax dollars to pay for healthcare expenses.

Which Category of Health Plan is Best for my Business?

When it comes to choosing a type of health plan for your employee’s in important to understand what you’re looking to achieve out of offering an employee health benefit. A clear understanding of this will provide you with the necessary direction to make an informed decsion around the benefits that would be to provide your staff. Some of the key questions to ask when looking to uncover what your health plan needs to offer include:

• What regulatory requirements must the plan meet to be ACA compliant?
• What Pre-existing conditions do employees have that would need to be covered?
• What is your company's budget for health insurance premiums?
• How important is flexibility in choosing healthcare providers to employees?
• How much are employees willing to pay out-of-pocket for healthcare expenses?
• How much risk is the company willing to assume for healthcare costs?
• What benefits are most important to employees?

Where should I start once I’m ready to invest in a health plan?

At this point, you should have all the necessary information to make a decision around what type of plan you intend to offer to your employees. The next step for your organization is to purchase the plan and provide employees access to your newly minted health plan, but where does one go to do this?

1. Insurance Carrier Direct: Employers can purchase group health insurance plans directly from an insurance carrier.
2. Benefits Broker: Employers can work with a benefits broker to help navigate the complex landscape of group health insurance plans. The broker can provide guidance on plan design, carrier selection, and enrollment, as well as ongoing support for plan administration.
3. Professional Employer Organization (PEO): A PEO is a company that provides HR and administrative services, including group health insurance plans, to other companies. Employers can partner with a PEO to provide a comprehensive benefits package to employees.
4. Association Health Plans (AHPs): AHPs are group health insurance plans that are offered by a trade or professional association to its members. Employers can join an association and participate in the AHP offered by the association.
5. Private Exchange: A private exchange is an online marketplace that allows employers to compare and purchase group health insurance plans from multiple carriers.

How the Benefit Administration Process Works:

Once you’ve come to a conclusion around how you’ll purchase your plan, depending on the method, it may require some work from your end to ensure your business is compliant and employees enroll to access the plan itself. So we’ve included a step-by-step guide of what the typical benefit enrollment process looks like for businesses:

1. Plan Design: Employers work with their benefits broker or insurance carrier to design a benefits package that meets the needs of their workforce and fits within their budget.
2. Enrollment: Employers must enroll employees in the selected benefits plans and collect any necessary employee contributions, such as premiums or 401(k) contributions.
3. Communication: Employers must communicate plan details and changes to employees, as well as educate employees on how to use their benefits effectively.
4. Compliance: Employers must ensure that their benefits plans comply with all applicable regulations, such as the Affordable Care Act (ACA), the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Code.
5. Record-keeping: Employers must maintain accurate records of employee benefits enrollment, contributions, and usage, as well as compliance documentation.
6. Billing and Payments: Employers must ensure that they are billed correctly for their benefits plans and make timely payments to their insurance carrier, benefits broker, or third-party administrator.
7. Claims Processing: For health insurance plans, employers must manage the claims process, including verifying eligibility, reviewing claims, and communicating with the insurance carrier or third-party administrator.

Navigating ACA-compliant health insurance as a small business owner can be daunting. To make an informed decision, understand available plans and regulatory requirements. With guidance from a broker or carrier, choose a plan that fits your budget and workforce needs. Regularly review your plan to ensure compliance and meet employee needs. This guide provides the information and resources you need to make the best decision.