As of January 1, several key parts of the Affordable Care Act (ACA) are now officially being implemented, with both individuals and businesses affected. Although the so-called employer mandate – which requires firms with 50 or more workers to provide health insurance – has been delayed until 2015, there are still several changes for companies that the ACA has brought about.
The first involves a tax credit expansion for companies with fewer than 25 employees. Previously, these smaller businesses were offered tax credits worth as much as 35% of the cost of their health plans. Under the new rules, if employers purchase plans through government-run exchanges, the credits can cover as much as 50%.
Another difference restricts the criteria that insurers can use to price plans they offer. If a company employs 50 or fewer people, insurance providers cannot consider that firm’s claim history, the gender of its workers or the industry the business is in. The ACA does still let insurance companies base rates on geography and whether or not a firm’s workers use tobacco.
A third ACA effect on businesses is indirect, although still important, experts say. Starting now, the federal government is taxing carriers on each insurer’s share of the fully-insured market. Weeding through the complexities, the end result will likely raise insurance rates for smaller businesses, because larger companies generally self-insure their staffs. Analysts say the tax will amount to $100 billion by 2024, forcing small business rates up by as much as 2.5%.