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Health Care Reform and Small Businesses

What does health care reform mean to me and my employees as a Small Business Owner ?

If you have anywhere between one to fifty full-time employees, then you may be wondering how the Affordable Care Act (ACA) will affect you and your small business.

The ACA requires that taxes be collected in order to fund certain provisions of health reform. New fees on insurers included in the ACA may translate into rate changes.

There are two new taxes that will go into effect January 1, 2014.

  •           The Health Insurer (or carrier) Tax
  •           Transitional Reinsurance Contribution Program Tax

When those taxes go into effect, customers’ dues and/or premiums will increase to an amount that covers the new taxes.  Starting with billing statements for January, 2014, new taxes will be included as a percentage of the dues and/or premiums.

The Health Insurer Tax

Starting in 2014, this annual fee on insurers will be collected as a percent of premium on all fully insured plans.  The size of this fee will vary with carrier depending on the insurer’s net written premiums.  This annual tax is designed to offset a portion of the expenses related to providing premium subsidies and tax credits to qualified individuals purchasing coverage through marketplace, or exchanges, health care plans.  If your insurance carrier offers a 12-month rate guarantee for your small group medical rates, the guarantee will be on the base  rate.

Transitional Reinsurance Contribution Program Tax

This tax will be used to fund transitional reinsurance programs in each state to help cover costs of the highest-risk individuals in non-group market. It will be effective from 2014-2016 and will apply to all small groups as of January 1, 2014.

The ACA created this program to help stabilize the individual market during the first years of the exchanges.  It provides payments to insurers that enroll the highest-cost individuals, both on and off the exchanges. To fund these payments, a fee will be collected from group health plans — including all insurers, self-funded plans, and third-party administrators — from 2014 through 2016.

Please stay tuned next Wednesday for more information on health care reform!