The open enrollment period for the Affordable Care Act (ACA) is currently open, and individuals have until January 15, 2023, to apply for health insurance at Healthcare.gov, or through their state-based marketplace. For small business owners, this may be the right time to reconsider their coverage options to help themselves and their employees.
Unfortunately, healthcare costs are hitting small business owners hard. A recent survey of small business leaders found that their top four most important healthcare issues are cost-related, with 28% saying that rising health insurance costs could impact their ability to offer health care benefits. However, provisions in the Inflation Reduction Act are taking steps to help relieve some of the pressure for small business owners & their employees.
With these factors in mind, it may be worth small business owners giving the ACA marketplace and new health benefit options a fresh look. Here are three factors to consider.
1. You or Your Employees May Be Able to Take Advantage of Tax Credits to Offset the Rising Cost of Health Insurance Premiums
The 2022 Kaiser Employer Health Benefits Survey reports that insurance premiums are projected to rise in 2023, which will lead to higher healthcare costs. However, enhanced subsidies established by the Biden Administration will keep costs in the ACA marketplace stable for people who qualify. The American Rescue Plan established key tax credits that reduce monthly premium expenses and make health coverage on the ACA Marketplace more affordable to millions of Americans, and the Inflation Reduction Act extended them for the next three years, through 2025 which may help employees of small businesses who are in the marketplace. The ACA Marketplace serves as an important source of coverage for 2.6 million small business owners and self-employed adults as well. Overall, roughly 13 million Americans will save an average of $800 per year, compared to what they would pay without the Inflation Reduction Act.
2. A Fixed “Family Glitch”
President Biden issued an Executive Order strengthening the ACA by fixing the “family glitch,” a loophole that has prevented an estimated 5 million people from qualifying for subsidized health plans. Under the ACA people qualify for a premium tax credit to purchase affordable, high-quality coverage through Healthcare.gov or their state’s marketplace if they do not have access to “affordable” health insurance. Prior to this order, employer-based health insurance was defined as “affordable” if it met that criteria for an individual plan covering the employee, but the same requirement was not in place for coverage for additional family members, making them ineligible for the tax credit. The federal rule change fixing this “family glitch” for coverage starting in 2023 means that more family members of employees who get insurance through their employer will be eligible for financial assistance in buying insurance through the ACA marketplaces.
3. Review All Health Insurance Options
In looking at their health coverage options, it is important that small business owners recognize they don’t know what they don’t know. Small employers may reconsider checking out the Small Business Health Options Program (SHOP) – between November 15 and December 15, minimum participation is waived. The program also offers calculators on full-time equivalent employees, the Small Business Health Care Tax Credit, and the minimum participation rate to determine if they are eligible for SHOP.
While traditional employer coverage has been the goal of many small employers, some are turning to new options like the use of new Health Reimbursement Accounts (HRAs). While reviews are mixed about whether these options are good or bad for workers, small business owners who use them like them. Additionally, recent research shows that more than 70% of small business owners were unaware of new Health Reimbursement Account (HRA) options. An HRA offers employees a monthly allowance for qualified medical expenses. Employees can then choose and pay for individual coverage premiums and other qualified medical expenses, and employers reimburse employees up to their allowance. New HRA products for small businesses include an individual coverage HRA (ICHRA), which became available in 2020, and the qualified small employer HRA (QSEHRA), which became available in 2017 and applies to businesses with less than 50 employees.
Small employers should talk to their brokers and other trusted advisors to explore their options through the Marketplace and new coverage products to see what opportunity works best for their business and employees.
Small businesses are looking for ways to offer healthcare benefits and stay competitive in a tight labor market. With more affordable opportunities available through the ACA marketplace and new coverage products, small business owners should take a fresh look at their options.