Small business owners and employees alike are preparing to make a big decision on Election Day, but that's not the only crucial choice the month of November has in store for them.
Nov. 1 kicks off the 2017 open-enrollment period, the window of time when anyone can sign up on the health insurance marketplace for health care coverage through the coming year. For many companies, this period coincides with other employer-sponsored benefits enrollment, and workers across the country will be choosing which plans to sign up for.
For employers, it can be difficult to balance communicating benefits plans to employees, documenting and tracking hours, and ensuring compliance with federal regulations all at the same time. The following helpful tips can keep you on track as you guide your business, and your employees, through the benefits selection process. [See Related Story: Obamacare: 10 Things Every Small Business Should Know]
Important regulations in the ACA
Health insurance isn't the only aspect of the benefits package an employer offers, but the Affordable Care Act (ACA) means health care is one of the most important pieces that an entrepreneur must consider. Failure to comply with the regulations could result in massive fines, so it's important to be aware of the ins and outs. Here are some of the key compliance issues small businesses should keep an eye on this year.
- Reporting requirements are due earlier in 2017 than they previously have been. The earlier "transition relief" extensions have expired, and Forms 1095-B and 1095-C are now due by Jan. 31, 2017. Failure to accurately and timely report can result in fines of up to $250 per day per affected individual, said Arthur Tacchino, chief innovation officer for SyncStream, an ACA solutions provider. Tacchino added that it's important to track employee hours properly, so you can understand exactly how many of your employees are considered full time under the letter of the law.
- Businesses that are required to, but do not, offer health insurance will be fined $2,000 annually per full-time employee, excluding the first 30 employees, Hector de la Torre, executive director of the Transamerica Center for Health Studies, said. Those companies offering insurance that is not considered affordable will be fined $3,000 for each employee who then seeks coverage on the individual exchange marketplace. (Insurance is considered unaffordable if it costs more than 9.5 percent of an employee's annual household income.)
- In 2015, President Obama amended the ACA to reclassify companies that have 51 to 100 employees so they are not subject to the reform provisions on small-group insurance, which would have led to higher premiums and fewer protections. However, these midsize employers are required to offer health insurance to their employees, unless those companies self-fund their workers' claims.
- Any company classified as a "small business" (50 or fewer employees) remains exempt from having to offer a health care plan to its staff. However, if a small business does choose to offer health insurance, the plan must meet the minimum essential coverage provisions, outlined here by the IRS. Michael Stahl, senior vice president of insurance marketplace and comparison site HealthMarkets, reminded employers that while some states grandfathered in plans that failed to meet the guidelines, those plans are beginning to expire as premiums increase.
- If you employ fewer than 25 people who earn an average of $50,000 or less per year, you may qualify for the Small Business Health Care Tax Credit, which covers up to 50 percent of your contributions toward your employees' premium costs if you use the Small Business Health Options Program (SHOP) Marketplace.
- Individuals who own multiple small businesses (each with fewer than 50 employees) will need to determine whether their combined total workforce makes them a midsize or large employer under the ACA. If so, they are required to comply with all measurement, reporting and insurance-coverage laws, said David Dent, major accounts manager at payments services provider JetPay.
The SHOP Marketplace operates differently in each state, so be sure to check your local marketplace options before selecting a plan.
Finding the right plans for your business
Every business's needs will be different, so it's important to shop around. Here's what to keep in mind as you review health care, retirement and other benefits plans.
Group or individual/family plan?
When considering health insurance benefits, most small business owners aren't aware of all their options, Stahl said. Group health insurance is the traditional means of providing employees with insurance benefits, but individual/family health insurance plans can enable employees to obtain more personalized and affordable coverage based on their needs, and save the business owner significant administrative time and expense. Offering this type of plan also gives you access to substantial government subsidies that lower the cost of coverage by 70 percent on average, Stahl said.
Stahl noted that a health insurance agent can help you assess whether group or individual/family insurance is the best structure for your business and your employees.
Consider costs to you and your employees
For health insurance, it's especially important to consider the overall price tag. Choosing a plan that is too costly for your employees could trigger big fines, so don't look to cut costs by shifting too much of the burden to your workers.
"The biggest choice employers have is how much they are willing to contribute to the plan and how much each employee is going to contribute," Tacchino said. "Not only does the employer have to offer coverage, but they [also] have to offer what is considered affordable."
As stated above, the penalty for non-affordable coverage is $3,000 annually per full-time employee, but "it's only full-time employees who go to the exchanges and receive subsidized coverage," Tacchino said.
Listen to your workforce
John Neumaier, executive vice president of Arthur J. Gallagher & Co., a global insurance broker and risk-management service firm, said that before you make any decisions, you should listen to your employees and better understand their needs and preferences.
"Quarterly employee-benefits round tables are a great way to engage employees and solicit feedback ... since the perceived value of a benefits program can vary greatly among different demographic groups within an employer's workforce," Neumaier told Business News Daily.
Lesley Grady, senior director at advisory and brokerage services company NFP Corp., agreed that employees feel empowered when they have choice, but added that too many choices are daunting and can lead employees astray. Your staff needs options, but those options need to tie to the company's strategy and workforce culture, she said.
Communicating benefits options to your staff
Choosing benefits packages is only half the battle; your employees also need to understand the packages. Communicating the plans to your employees clearly and simply is the key to helping workers take full advantage of their benefits packages.
John Park, chief strategy officer at Alegeus, a provider of consumer directed health care solutions, said many people find the process of benefits enrollment to be difficult and complex. This is especially true when you introduce changes, which lead to an increase in confusion and anxiety, he said.
"Employers are overconfident about communication regarding benefits," Park said. "Most employers only communicate once per year, during open enrollment, [but] communication should be ongoing about enrolling in and using benefits."
Our sources offered their best advice for discussing benefits.
"Understand the forms and what you're reporting. One of the biggest struggles we've had as a company with employers we've worked with is that they didn't understand the tax forms themselves, and then couldn't answer inquiries from their employees. The better the employer can understand their compliance and forms, the more likely they are to avoid penalties and [to] better field questions." – Arthur Tacchino, chief innovation officer, SyncStream
"Educate your employees on basic benefits terminology — deductible, premium, etc. — during each open-enrollment cycle. Employees who fully understand their benefits packages are more likely to appreciate them." – George Katsoudas, division senior vice president, compliance counsel at Arthur J. Gallagher & Co.
"As employers increasingly ask their employees to be better consumers of health care, companies must equip them with the information necessary to make wise cost decisions. A good first step is to ensure that employees know how to access the free transparency tools provided online by most medical carriers. Provide employees with a breakdown of medical and pharmaceutical cost increases to avoid 'sticker shock.'" – John Neumaier, executive vice president of Arthur J. Gallagher & Co.
"Give people the combination of choice and personal accountability for their health care. Part of this is a benefit design that promotes financial responsibility [and] being able to utilize their benefits in the most effective way. In the long term, it will result in better choices and behavior changes that will lead to better health and lower costs." – John Park, chief strategy officer at Alegeus
For more advice on creating a great benefits package for your employees, visit this Business News Daily guide.
Additional reporting by Nicole Taylor. Some source interviews were conducted for a previous version of this article.