Employer Coverage and the Affordable Care Act
Employers are not required to offer health insurance.
If you are insured through a large employer, your coverage is likely to remain largely unchanged. Most large employers already offer comprehensive health insurance to their employees.
Small vs. large employers
Health insurance laws apply differently to small and large employers, so it's important to know the size of your employer. Here are key reasons why size matters.
- Small employers with 1-50 employees have new options for buying coverage through Oregon's online marketplace, Cover Oregon. Cover Oregon will determine whether a business qualifies as a small employer.
- Large employers with more than 50 full-time equivalent employees face a tax penalty, starting in 2015, if any full-time employee receives financial assistance to buy health insurance through an exchange such as Cover Oregon.
- Employers with fewer than 25 full-time equivalent employees may be eligible for tax credits to offset up to 50 percent of their premium costs.
- Self-employed persons with no employees can buy an individual health plan through Cover Oregon and may qualify for a subsidy to help with costs.
Small group plans sold after Jan.1, 2014, must include essential benefits in 10 categories, including prescription drugs and mental health and substance abuse services.
Plans will be labeled to help consumers understand the level of coverage they are buying. The levels of coverage are:
- Bronze - The plan must cover 60 percent of expected essential health benefit costs for the average individual
- Silver - The plan must cover 70 percent of expected essential health benefit costs for the average individual
- Gold - The plan must cover 80 percent of expected essential health benefit costs for the average individual
- Platinum - The plan must cover 90 percent of expected essential health benefit costs for the average individual
Insurers can sell more than one plan in each of the categories although Oregon requires all insurers to sell one standardized bronze plan, one standardized silver plan, and one standardized gold plan. These plans will have similar benefits, making it easier to compare different companies based on price, provide networks, customer service and other factors.
Limiting out-of-pocket costs: Small employer plans sold or renewed in 2014, must limit consumers' annual out-of-pocket costs (such as co-pays) to approximately $6,350 for individual and $12,700 for families. These limits will be indexed to average premium growth in future years.
Health Savings Accounts (HSA): Health Savings Accounts (HSA) are still allowed.
Lifetime coverage limits: Insurance companies cannot place a dollar limit on how much they cover over the lifetime of a member.
Annual coverage limits: For non-grandfathered plans issued or renewed on or after Jan. 1, 2014, annual dollar limits on coverage of essential benefits will be prohibited.
In addition to the benefits selected, the amount a small employer (50 or fewer employees) pays for coverage depends on:
- The average age of employees/dependents
- The benefits the employer selects
- Location in the state
- The number of family members on the plan
- Tobacco use by employees.
Large employers negotiate rates directly with the insurance company; these plans' rates are not subject to state regulation.
Small employers who have received coverage through an association may find plans and costs changing as a result of new rules.
Making Coverage Affordable
Small business tax credits: Businesses with fewer than 25 full-time equivalent employees (FTE) and average annual wages less than $50,000 per employee may qualify for tax credits. Beginning in 2014, the tax credit is available only for plans purchased through Cover Oregon, the state's online health insurance marketplace.
In tax year 2014, the maximum credit is 50 percent of the employer's premium costs (35 percent for nonprofit employers). Employers can still deduct from taxes the rest of the premium costs not covered by the tax credit.
The full 50 percent tax credit is available for a business with:
- 10 or fewer full time equivalent workers and
- average annual wages of $25,000 or less.
The tax credit phases out completely for employers with 25 full time equivalent workers or average wages of $50,000. The IRS administers this program. This page outlines Affordable Care Act tax provisions for employers.
Buying insurance through Cover Oregon
This fall, small employers can shop for coverage at Cover Oregon, www.coveroregon.com.
One new option: The employer can choose a level of coverage, then allow each employee to select his or her own insurer and plan. Cover Oregon will collect the employer and employee contributions and direct those payments to the chosen insurers. See the fact sheet for small employers.
Beginning in 2016, employers with up to 100 employees may shop in the Cover Oregon exchange.
Employers with more than 200 employees who offer at least one health plan must automatically enroll new fulltime employees into one of the plans offered, though employees may opt out. This is expected to increase the number of employees with coverage. The deadline for complying hasn't been set yet; the U.S. Department of Labor expects to complete rulemaking in 2014.
Large employers (more than 50 employees) will pay a penalty, starting in 2015, if they don't offer meaningful and affordable health insurance to their employees. A plan is considered unaffordable if the employee's premium costs more than 9.5 percent of the employee's household income or if it pays for less than 60 percent of covered health care expenses.
In considering whether the plan is affordable, the premium cost for an employee's spouse or children is not taken into account. In other words, the law looks at the cost of employee-only coverage and not a family plan.
If an employer of any size offers affordable coverage and makes it available to dependents, even though the employer may pay little or no part of the costs, family members will not be eligible for subsidies through an exchange.