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Open Enrollment: What Small Businesses Need to Know About the Affordable Care Act

image for txking/Shutterstock
txking/Shutterstock

In addition to preparing for Election Day, work holiday parties and the December holidays, small business owners and employees are gearing up for open enrollment. Open enrollment is a period of time in which employees are eligible for certain healthcare plans and can change their insurance. Open enrollment began on Nov. 1 and ends Dec. 15.

For many companies, the period coincides with the enrollment period of other employer-sponsored benefits. For many small businesses, the open enrollment process is fraught with difficulties, including communicating benefit plans to employees and complying with federal regulations, which can change from year to year, to name just a few.

As you prepare for open enrollment, here is a recap of the rules for 2020 so you can keep your company compliant and address questions your employees are likely to have.

Judy Kamens, a compliance specialist at Lawley Insurance, has prepared a checklist that outlines out-of-pocket maximums, preventative care benefits and limits on health flexible savings account contributions. Here's more about the compliance issues small businesses need to be aware of this year. 

Health plans that are not grandfathered into the new year must meet limits on cost-sharing for essential health benefits (EHB). 

"The annual limit on total enrollee cost-sharing for EHB for plan years beginning on or after Jan. 1, 2020, is $8,150 for self-only coverage and $16,300 for family coverage," said Kamens. 

Employees need to review their plans' out-of-pocket maximums and guarantee that they comply with the Affordable Care Act's (ACA's) limits for the 2020 plan year. 

Plans with a high deductible, also known as a high-deductible health plan (HDHP), need to be compatible with a health savings account (HSA). As part of the law, the plans' out-of-pocket maximum must be lower than the ACA's limit, said Kamens. On the 2020 plans, the out-of-pocket maximum limit for HDHPs is $6,900 for self-only coverage and $13,800 for family coverage. 

A plan that uses multiple service providers to administer benefits should be confirmed that it "coordinates all claims for EHB across the plan's service providers or divides the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2020," added Kamens. 

In addition, "group health plans with a family out-of-pocket maximum that is higher than the ACA's self-only out-of-pocket maximum limit must embed an individual out-of-pocket maximum in family coverage so that no individual's out-of-pocket expenses exceed $8,150 for the 2020 plan year." 

All plans that fall under preventative care benefits that are not grandfathered in need to cover select health services but can't impose cost-sharing requirements such as deductibles, copayments and/or coinsurance. Examples of preventative care benefits include

  1. Alcohol misuse screening and counseling for adults
  2. Blood pressure screening for adults
  3. Hepatitis B screening for people at high risk, including people from countries with 2% or more Hepatitis B prevalence, and U.S.-born people not vaccinated as infants and with at least one parent born in a region with 8% or more Hepatitis B prevalence.
  4. Depression screening for adults
  5. HIV screening for adults
  6. Diet counseling for adults at higher risk for chronic disease
  7. Autism screening for children at 18 and 24 months
  8. Fluoride varnish for all infants and children as soon as teeth are present
  9. Gonorrhea preventive medication for the eyes of all newborns
  10. Iron supplements for children ages 6 to 12 months at risk for anemia

There are more than 50 different preventative care services. For information on what they are, visit the U.S. Preventive Services Task Force

A flexible spending account (also known as a flexible spending arrangement or FSA) is a type of savings account that employees disburse their money into so that select out-of-pocket healthcare costs can be covered. Unlike traditional savings accounts, employees don't pay taxes on this money. It is not mandatory for employers to contribute to workers' FSAs, but some contribute as an employee benefit. The maximum amount an employer contributes should not exceed the ACA's maximum limit for the plan year. 

For 2020, the IRS has announced the following: 

The annual contribution limitation: For the calendar year 2020, the annual limit on deductions for an individual with self-only coverage under a high-deductible health plan is $3,550. For an individual with family coverage under a high-deductible health plan, the limit is $7,100. 

The high-deductible health plan: For the calendar year 2020, a high-deductible health plan is defined as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage and annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) that do not exceed $6,900 for self-only coverage or $13,800 for family coverage. 

Employers want to know what they legally are required to do if an employee misses open enrollment, and the answer may surprise you: absolutely nothing. 

Employers are not legally responsible for employees who miss the open enrollment deadline. Of course, employees may be upset, and this can cause extra stress and paperwork for your administrative staff, but you are legally responsible.

Every business's needs are different, so it's important to shop around. Here's what to keep in mind as you review healthcare, retirement and other benefits plans. 

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% 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. 

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 financial 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," said Arthur Tacchino, chief innovation officer of SyncStream. "Not only does the employer have to offer coverage, but they [also] have to offer [coverage that] is considered affordable." 

As stated above, the penalty for nonaffordable 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. 

John Neumaier, regional president, Northeast region of Arthur J. Gallagher & Co., a global insurance broker and risk-management service firm, advised that before you make any decisions, listen to your employees so you understand their needs and preferences. 

"Quarterly employee-benefits roundtables 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 choices, but 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.

Choosing benefits packages is only half the battle; your employees also need to understand them. Communicating the plans to your employees clearly and simply is the key to helping workers take full advantage of their benefits. 

John Park, vice president of strategic business development and chief transformation officer at Stella Health, said many people find the process of benefits enrollment 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 advice on discussing benefits with your employees. 

"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 compliance and [the] 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, senior vice president compliance counsel, Arthur J. Gallagher & Co. 

"As employers increasingly ask their employees to be better consumers of healthcare, 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, regional president, Northeast region, Arthur J. Gallagher & Co. 

"Give people the combination of choice and personal accountability for their healthcare. Part of this is a benefit design that promotes financial responsibility [and] utilizing 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, vice president of strategic business development and chief transformation officer, Stella Health 

For more advice on creating a great benefits package for your employees, visit this Business News Daily guide.

As you help your employees prepare for open enrollment, there are a few questions you should be prepared to address. 

Do your employees have to sign up for all insurance types during this period? No, they do not. The most popular types of insurance employers typically sign up for during open enrollment include dental, vision, short-term disability insurance and long-term disability insurance.

What is the difference between a PPO and an HMO?  The differences between health maintenance organization (HMO) and preferred provider organization (PPO) plans include network size, the ability to see specialists, costs, and out-of-network coverage, according to Medical Mutual. While PPOs tend to have more flexibility in seeing specialists and have larger networks than HMOs, along with some out-of-network flexibility, they cost more than HMOs. 

What happens to the money in my HSA after I turn 65? Any money that is remaining in a health savings account after the age of 65 can be used to pay for out-of-pocket healthcare expenses such as a new pair of eyeglasses and copayments. 

To get even more prepared for open enrollment and view additional frequently asked questions, visit SHRM's Open Enrollment Guide

Adam C. Uzialko also contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.

Marisa Sanfilippo

Marisa Sanfilippo is an award-winning marketing professional who has more than six years experience developing and executing marketing campaigns for small and medium sized businesses with a focus on digital marketing. After graduating Stockton University with a B.A. in Communications and minor in writing, Marisa worked as a freelance journalist for numerous publications, ultimately earning a position as an e-marketing specialist for a credit union. While in that position, she earned HubSpot's Inbound Marketing Certification and helped build the organization’s digital marketing strategy from the ground up. Her efforts helped lead the credit union to success on and offline including: a 200%+ organic increase in Facebook followers, a sales generating blog, and much more. Later on, she worked on a social media campaign that gained recognition by The Huffington Post.