When the clock strikes midnight tonight, the country will not only ring in a new year; it will also ring in several important new rules under the controversial health care law.
However, because so many provisions have been tweaked and so many deadlines have been pushed back, many employers and entrepreneurs have grown confused about which parts of the law actually take effect on Jan. 1. So, here’s a quick review of what does (and does not) change for small business owners on Wednesday.
1. The small business tax credit expands
During the past three years, small business owners with fewer than 25 employees who offered health coverage could take advantage of a new tax credit worth as much as 35 percent of the cost of their plans. In 2014, the credit expands to cover as much as 50 percent of a firm’s health expenses.
However, for the most part, it will only be available to employers who purchase plans through the new government-run small-business exchange (which leaves out employers in four states). So while the subsidy will increase for some firms, others who elect to continue offering last year’s plan will no longer receive help paying for it from Uncle Sam.
2. The health insurance tax starts
It’s not technically a tax on small businesses, but many experts say it might as well be. That’s because the new health insurance tax the federal government will start levying on insurance carriers come January is based on each insurer’s share of what is known as the fully-insured market — that is, the type of plans that are generally purchased by small businesses, not large ones (the latter of which tend to self-insure their workforces).
Consequently, insurance companies have acknowledged that they will likely pass the added expense on to small employers in the form of higher rates. In total, the tax will shake insurers of $8 billion next year and about $100 billion over the next decade, and that alone is expected to drive up insurance costs by around 2 or 2.5 percent for small employers.
3. Insurers can no longer calculate prices based on industry, history
Just like they do with individual or family health plans, insurance companies take into account a number of factors when determining a firm’s premiums. Starting next year, though, for firms with no more than 50 workers, carriers will no longer be able to base prices for new plans on some criteria, including a company’s industry, its claim history or the gender of its employees.
In addition, starting in the new year, insurance companies can’t turn down a company based on the health status of its employees or their dependents, even if workers or their families have pre-existing conditions.
Insurers may continue to set rates based on a company’s geographic area and its employees’ use of tobacco, though.
4. The “employer mandate” takes effect (technically)
One of the most controversial pieces of the health care law for employers, the “employer shared responsibility” clause of the Affordable Care Act — often called the “employer mandate” — requires firms with 50 or more workers to offer sufficient health coverage starting in 2014 or face a steep fine.
However, while the rule is still technically in place, the administration announced earlier this year that it would not penalize firms that did not comply in 2014, essentially delaying the mandate until the start of 2015.
5. Automatic enrollment and waiting period rules postponed
The employer mandate was not the only provision that has been pushed back. Starting in the new year, companies with at least 200 workers were supposed to start automatically enrolling new hires in their health care plans (employees who do not want coverage or are covered by a family member’s plan would have to actively opt out of the plan). Additionally, the law includes new penalties for smaller employers that wait longer than 90 days to allow new workers to enroll in their company’s health care plan.
Both of those rule changes have been indefinitely delayed as employers await further guidance from the Department of Labor.