Affordable Care Act

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The Affordable Care Act (also called ACA or Obamacare) refers to legislation passed by the U.S. Congress and signed into law by President Obama in 2010. The legislation changed how health insurance functions in the United States. Among other provisions, the Affordable Care Act expanded eligibility of Medicaid and required most Americans to purchase health insurance. The legislation set in motion the creation of markets referred to a health insurance exchanges for individuals and for small businesses who wish to provide insurance coverage for their employees. There is nothing in the legislation that requires employers of 50 or fewer employees to provide insurance coverage but they must make employees aware of the availability of coverage through exchanges.

Proponents argue Obamacare makes health insurance more affordable, while critics contend it is too expensive and constitutes excessive government interference in the U.S. economy. The legislation was labeled Obamacare by its opponents, who believed it would hurt the chances of the legislation passing. Subsequently, the backers of the legislation adopted the name, as well.

Major Provisions of the Affordable Care Act

• Require most U.S. citizens and legal residents to have health insurance.

• Create state-based healthcare insurance benefit exchanges through which individuals can purchase coverage, with premium and cost-sharing credits available to individuals/families with income between 133-400% of the federal poverty level (the poverty level is $19,530 for a family of three in 2013)

• Create separate exchanges through which small businesses can purchase coverage.

• Require employers to pay penalties for employees who receive tax credits for health insurance through an Exchange, with exceptions for small employers.

• Impose new regulations on health plans in the Exchanges and in the individual and small group markets.

• Expand Medicaid to 133% of the federal poverty level.

SHOP Marketplaces

The Affordable Care Act mandated states to provide their residents a marketplace for individuals and small businesses to purchase healthcare insurance. For small businesses seeking coverage for their employees, these marketplaces are called Small Business Health Options Programs (SHOP). For 2014, the SHOP Marketplaces are open to employers with 49 or fewer full-time-eqivalent employees (FTEs).

Traditionally, individuals and small businesses were forced to pay for healthcare insurance coverage at prices much higher than the prices available to employees of large companies. That's because insurance companies are able to justify lower premiums to large employers because they can spread across many people the risk of needing to pay out for the healthcare needs of any one employee. In other words, there's a good chance that a large company will have lots of healthy people paying premiums and only a few who need major treatment during the coverage period.

However, at a small business with few employees, or in the case of individuals, the insurance company does not have the ability to spread such risk. Establishing healthcare exchanges or SHOPs is intended to enable individuals and small employers to pool their purchasing power, in order to benefit from the type of risk-sharing that large companies have.

Each state was given the opportunity to run its own marketplace, but only 14 states chose to do so. Therefore, 36 states became a part of the marketplace run by the federal government.

Benefits of SHOP Marketplaces, according to HealthCare.gov, the U.S. government-run program:

• You control the coverage you offer and how much you pay toward employee premiums.
• You can compare health plans online on an apples-to-apples basis, which helps you make a decision that's right for your business.
• You may qualify for a small business health care tax credit worth up to 50% of your premium costs. You can still deduct from your taxes the rest of your premium costs not covered by the tax credit. (Beginning 2014 the tax credit is available only for plans purchased through SHOP.)

Affordable Care Act Requirements for Small Businesses

Employers with 49 and fewer full time employees

• Employers with 49 or fewer full-time employees are not required to offer health insurance coverage under the Affordable Care Act. However, all companies, regardless of size, are required to notify their employees about the healthcare marketplaces that are available through their state or the federal government.

• To encourage small businesses to provide healthcare insurance to their employees, the Affordable Care Act established the Small Business Health Options Program (SHOP), a new process of buying health insurance for small businesses. For 2014, the SHOP Marketplace is open to employers with 49 or fewer full-time-eqivalent employees (FTEs).

Employers with 50 or more employees

• Employers with 50 or more full-time employees that do not offer healthcare coverage and have at least one full-time employee who receives a premium tax credit a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment.

• Employers with 50 or more full-time employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees from the assessment. (Effective January 1, 2014)

• Employers with more than 200 employees must automatically enroll employees into health insurance plans offered by the employer.

• Employees may opt out of coverage.

See also

• Healthcare reform
• Affordable Care Act Hub

External Links

• HealthCare.gov - Official U.S. government website for federally-run SHOP marketplace.