When selecting a group health insurance plan for your employees, you want to be sure your company receives the best rates for quality benefits while meeting its legal requirements. Primary Care Insurance Solutions, a local agency specializing in Texas group health insurance benefits, makes it easy.
As local insurance brokers with national resources, we can offer a variety of employer group health plans without bias and only recommend the best options for you and your group. As experts in the industry, we stay informed about what the Patient Protection and Affordable Care Act (ACA) and other rules and regulations, including the Families First Coronavirus Response Act (FFCRA), require. We keep our clients informed, and when you need assistance, we are here for you.
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The ACA passed on March 23, 2010 with the intent of improving the U.S. health care system. The legislation was primarily focused on bringing coverage to the uninsured and decreasing health care costs through changes implemented over the next several years. The law places certain legal obligations on individuals and employers as it relates to obtaining health insurance.
Although a Texas-led lawsuit resulted in a December 2019 U.S. Fifth Circuit Court of Appeals ruling that the ACA’s individual mandate is unconstitutional, until a final resolution is made on the whole law, the ACA remains in effect and employers must comply.
LARGE GROUPS (> 50 EMPLOYEES)
SMALL GROUPS (< 50 EMPLOYEES)
LARGE GROUPS (> 50 EMPLOYEES)
Under the ACA, large employers with at least 50 full-time employees and/or full-time equivalent employees (see below) are subject to the Employer Mandate, also known as the “pay or play provisions (PPP)” . This means you must either offer employees affordable insurance with the minimum essential coverage or pay a penalty.
How to Calculate Your Company’s Full Time Equivalent Employees If your company employs part-time workers, you must calculate your number of full-time equivalents (FTE) for PPP, which you can do by adding the total number of hours your part time employees work and dividing it by the number of hours a full-time employee works during the same period. For example, two part-time employees working 15 hours a week equals one full-time equivalent employee working 30 hours a week. If you employ 50 or more full-time employees or full-time equivalents, you must offer your employees health insurance or pay a penalty.
If you do not employ 50 or more employees, your company is not subject to the Pay or Play Mandate and will not be penalized for not offering health insurance. However, your group health insurance plan will only use modified community rates, which could increase the costs of providing coverage for your company.
What is the ACA Pay or Play Penalty for an Employer Not Complying? In 2023, employers who do not comply with the ACA Pay or Play Mandate risk an annual a fine of $2,880 (2023) per full-time employee minus the first 30.
If your company offers a group health insurance plan that does not cover mandated Essential Health Benefits and/or does not pay at least 60% of covered healthcare expenses, your employees can purchase their own policies through the Health Insurance Exchange and get a tax credit. Your company will then be penalized $4,320 (in 2023) for each employee receiving a tax credit. The maximum penalty for an employer is the equivalent of $2,750 per employee minus the first 30 employees, which would be the same penalty as if you did not provide your employee coverage. For example:
Company A has 200 employees, 50 of which are eligible for a tax credit. The penalty would be $4,320 x 50 = $216,000. This is well below the maximum penalty for this company of $467,500 (200 employees minus 30 equals 170 employees x $2,880 for a total of $489,600).
Company B has 200 employees, 150 of which are eligible for a tax credit. The penalty would be $4,320 x 150 = $648,000. This would exceed the maximum penalty, the penalty assessed if the employer offered no coverage at all.
If you provide health insurance that covers Essential Health Benefits and pays for at least 60% of covered health care expenses, but you have employees who would have to pay more than 9.78% of their family income for employee only coverage, those employees also have the option to shop the Exchange and may be eligible for a tax credit and the above examples would apply.
Which employees are eligible for a tax credit or subsidy? Individuals earning between 100% and 400% of the federal poverty level are eligible for subsidies if they purchase insurance through the Exchange. For a family of one, 100% of the federal poverty level is $12,760 and 400% is $51,040. However, if an employee has access to a qualified, affordable employer sponsored health plan, the employee and their family members do not qualify for the subsidy. Affordable coverage means that the premium for employee only coverage would not exceed 9.78% of the employee’s household income.
Unfortunately, most employers do not know the family income for an employee. If you are offering health insurance and want a safeguard against employees going to the exchange and receiving a credit, you would need to make sure that you do not have any employees paying more than 9.78% of their income for employee only health insurance.
How Can I Tell Whether My Company’s Group Health Plan Is Compliant? For a group health insurance plan to meet the minimum standards set by the federal government, it must meet an actuarial value of covering at least 60% of health expenses. There are also Essential Health Benefits that each plan must cover. Those benefits are:
Ambulatory patient services, such as doctor’s visits and outpatient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care
Many group plans already include a majority of these benefits, with the exception being the pediatric oral and vision care and these additions are expected to increase rates in the marketplace. Individual health insurance does not currently cover maternity coverage and this required addition will see increased costs for those policy holders.
If you have questions about purchasing health insurance for your group of fewer than 50 employees, contact us today!
SMALL GROUPS (< 50 EMPLOYEES)
Small businesses that employ less than 50 full-time or full-time equivalent employees are exempt from the ACA Pay or Play Provisions. You can learn about how Texas insurance law defines a small business and how to convert part-time employee hours to full-time equivalent employees at the Texas Department of Insurance.
Adjusted Community Rates for Small Businesses
Small businesses who sponsor a group health plan and have an employee count under 50 are subject to adjusted community rates, which can be based on factors including age, gender, tobacco use, location of residence and family size.
The rating system has a 3:1 premium difference for all ages, meaning that the youngest employee will only be 3 times less expensive than the oldest employee of the group. However, tobacco users can be charged up to 50% more in premiums. Carriers cannot charge different rates due to pre-existing medical conditions.
Deductible limits and out-of-pocket costs are also capped at a certain dollar amount. The maximum out-of-pocket limits for group health insurance plans in 2020 is $8,150 for single coverage and $16,300 for family coverage. The maximum deductible is the same as the maximum out-of-pocket costs.
Should My Small Business Change Health Insurance Policies?
If your company offers a group health insurance plan that fails to cover the Essential Health Benefits required by ACA and/or does not pay at least 60% of covered health care expenses, you need to change policies. Essential Health Benefits include:
Ambulatory patient services, such as doctor’s visits and outpatient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services, including behavioral health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care
Many group plans already include a majority of these benefits, with the exception being the pediatric oral and vision care and these additions are expected to increase rates in the marketplace. Individual health insurance does not currently cover maternity coverage and this required addition will see increased costs for those policy holders.
If you have questions about purchasing health insurance for your group of fewer than 50 employees, contact us today!
