Small Employer Health Reform

Several states have enacted small employer market reforms that are designed to enable small employers to obtain health insurance at rates that are lower than rates that have traditionally been available to them. The reforms include laws that guarantee renewals; that limit the extent to which your group's health status can be used to set rates; that provide basic, low-cost policies that do not include costly benefits that are mandated for standard policies; and that require insurers to make coverage available to you regardless of your employees' health condition. No two states have the same set of reforms. An insurance agent can give you more information about the specifics in your state.

In the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Congress extended some of these state reforms to the federal level. If insurers choose to offer plans in the small business market, they must offer the plans to all small businesses in that market. Thus, for example, an insurer cannot choose to drop your coverage because one of your employees develops a heart condition. To gain the protection of these federal rules, though, you must have at least two employees.

Health care reform. The enactment of the Patient Protection and Affordable Care Act and related legislation heavily regulates the insurance industry, instituting benefit and coverage mandates. Except for certain grandfathered plans, it mandates that by 2014, all qualified health benefit plans offer at least an "essential health benefits package" as defined by the Secretary of Health and Human Services. The law prohibits insurance companies from:

• denying coverage or refusing to renew coverage because of certain conditions;
• considering any factors other than age, geographic area, family composition and tobacco use for premium rating;
• imposing lifetime limits on the dollar value of coverage; or
• dropping qualifying children from their parents' insurance plans before the age of 26.

Some of these provisions are already in effect, with other provisions scheduled to go into effect in 2014.

In addition, beginning in 2014, small businesses with fewer than 100 employees may purchase insurance in an affordable insurance exchange.

For more information on the Affordable Care Act and small business, visit the government's website. The website also offers health care coverage information for self-employed small business owners with no employees.

Simple cafeteria plans. The Patient Protection and Affordable Health Care Act provides eligible small employers with the option of providing pre-tax benefit plans through a simple cafeteria plan. The main advantage of using a simple cafeteria plan is that the nondiscrimination requirements favoring highly compensated and key employees are removed.