Health Benefit Exchanges
The Affordable Care Act (ACA) introduces a new option for small business employers and individuals to access health insurance, called Health Benefit Exchanges, or Health Insurance Marketplaces. These online Marketplaces are established in each state and provide another way to research, compare and enroll in health insurance offered by health insurers.
There are also two types of Marketplaces within each state. One is the Individual Marketplace, where individuals can shop for insurance. And the other is for small business employers, called the SHOP Marketplace, short for Small Business Health Options Program. The SHOP Marketplace provides a place for eligible employers to explore health insurance plans and choose which level of coverage to offer their employees.
The initial open enrollment period for plans offered through the Individual Marketplaces starts October 1, 2013, and ends March 31, 2014. In most states, enrollment in the SHOP Marketplaces starts October 1, 2013, and going forward, small business employers can enroll in a plan throughout the year. Coverage will begin for plans purchased through the Marketplaces as early as January 1, 2014.
In 2014-2016, only individuals and small group employers are eligible to participate in the Marketplaces; beginning in 2017, states may permit employers in the large group market to participate.
The health plans offered in the Marketplaces must meet standard requirements for affordability, Essential Health Benefits, and consumer protections. The ACA defines four coverage levels:
- Bronze Plan: covers 60% of the actuarial value of the covered benefits
- Silver Plan: covers 70% of the actuarial value of the covered benefits
- Gold Plan: covers 80% of the actuarial value of the covered benefits
- Platinum Plan: covers 90% of the actuarial value of the covered benefits
Plan levels differ by how much an employee pays in monthly premiums and by what they pay in out-of-pocket expenses for medical services. For example, bronze plans have lower monthly premiums, but require employees to pay more out-of-pocket when they receive care. And platinum plans may cost more each month, but employees will pay less out-of-pocket when they receive care.
The Marketplaces must provide specific support services including:
- Certification of plans qualified for the Exchange
- Support for calculation of subsidies
- Health plan rating system and rate review
- Standardized format and definitions for plan options and coverage
- Enrollment facilitation
- Website and toll-free hotline
In addition, the Individual Marketplaces are where consumers can find out if they are eligible for federal subsidy assistance. To qualify for subsidies, individuals or families must:
- Buy insurance through the Individual Marketplace
- Meet household income requirements
- Not have affordable health insurance available through an employer
- Not be eligible for Medicaid or Medicare or enrolled in additional specified government programs
The subsidies can be used to lower the monthly premium costs, and for qualifying individuals, to reduce the out-of-pocket expenses. Subsidies or tax credits are not available to employees who get their health insurance through SHOP, but employers may pay a portion of their employees' health insurance premiums to lower their employees' costs.
Small business tax credit
Starting in 2014, the small business tax credit is now only available to eligible employers who purchase health insurance through the SHOP Marketplaces, and is now worth up to 50 percent of their premium costs. Employers who qualify must have fewer than 25 full-time employees with average annual wages less than $50,000, and the employer must pay 50 percent of employees' premiums. This tax credit is temporary and only available through plan year 2016.
For information about your state's Exchange, visit this page on HealthCare.gov and click on your state: What Health Insurance Marketplace Will Serve Me?
Model Notice Available for Employers to Share with Employees on Exchanges
On May 8, 2013, the Department of Labor (DOL) issued Technical Release 2013-02 which provides temporary guidance for employers regarding the requirement to notify employees of coverage options available through Exchanges. This Model Notice to Employees of Coverage Options is available for employers to use today if they wish. Employers were to provide the notice to current employees by Oct. 1, 2013, and to all new hires within 14 days of their hire date going forward.
The DOL posted an FAQ on Sept. 11, 2013, indicating that employers will not be penalized for failing provide notice to workers by Oct. 1.