Small Business Owners: Health Insurance Alternatives for Your Employees

With new healthcare reform laws taking place, small business owners in California and all over the country are finding it difficult to understand what the changes are and how it affects them and their employees.  A common question asked by many small business owners is, “What health insurance alternatives are available to my employees with the new law?”

Starting in 2014, small businesses with fewer than 100 employees can shop in an Affordable Insurance Exchange—a new, transparent, competitive marketplace where individuals and small businesses can buy affordable, qualified health benefit plans. This gives small businesses power similar to what large businesses have to get better choices and lower prices for employee coverage.

In most states, the health insurance exchanges will be available beginning January 1, 2014. California, ahead of every other state, has already passed legislation to form an exchange. California is currently in the process of setting up this exchange.

Exchanges will offer more choices of high-quality coverage and lower prices.  Exchanges will offer a choice of plans that meet certain benefits and cost standards.

  • Small businesses will benefit from insurance with lower administrative costs compared to the choices available in the small business market today because they will be able to pool together.
  • Limits on insurance rating, such as no more rating based on employees’ health status or gender, will lower premiums for many small businesses.
  • The small business tax credits and the new competition promoted by Affordable Insurance Exchanges will help keep the cost of insurance down.

What’s the difference between the exchange for individuals and SHOP for small businesses?

The law provides for a separate exchange for small businesses (Small Business Health Options Program, SHOP) and one for individuals. In California, the small group market is defined as employers with 2-50 employees. Beginning in 2017, all employers with 100 or fewer employers may participate in the exchange. States may allow businesses with more than 100 employees to participate after 2017. States can also choose to combine the individual and small business exchanges.

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