Editor's Note: This is part of a continuing series counting down to the Oct. 1 launch for new state health insurance exchanges that have been created to help people find coverage and meet the requirement for mandatory health insurance that takes effect Jan. 1, 2014. Read part one "How Will My Health Insurance Change?" part two "A Consumer's Toolbox" and part three "The Penalties for Uninsured Americans." See "A Consumer's Guide to Obamacare."
The Affordable Care Act will have an enormous impact on employer health insurance policies, but it's not expected to make a big difference in 2014 – the first year the mandate to have health insurance will be in effect.
Still, employers remain a major source of information about Obamacare, and many are offering resources to help explain the state health insurance exchanges set to open Oct. 1. "They anticipate that their employees will have lots of questions as they see lots of advertising about the exchanges," says Tracy Watts, the national leader for health reform at Mercer, which advises employers and helps administer employee benefit programs.
Whether you work at a company with 10 or 1,000 employees, here's what you need to know about employer health insurance policies under Obamacare.
Pay careful attention to employer health care notices. Small employers with 50 or fewer full-time employees do not have to offer employee health insurance. More than 90 percent of employers with more than 50 employees already offer health insurance and are expected to continue to do so in 2014, according to Karen Pollitz, a senior fellow at the Kaiser Family Foundation. Obamacare requires larger employers to offer health insurance, but the effective date of the employer mandate was delayed from Jan. 1, 2014, to the beginning of 2015.
Watts, who specializes in how Obamacare affects larger employers with more than 50 full-time employee, says larger employers that offer health insurance next year will comply with most, if not all, coverage requirements of Obamacare, but there are some exceptions. For this reason, employees should pay close attention to any communication from their employers about 2014 health plans and changes.
By Oct. 1, all employers are required to provide employees an "exchange notice" about whether or not the employer offers insurance. The notice must tell employees about the new public insurance exchanges, the possibility that they might be eligible for subsidies if they buy insurance on these exchanges and the possibility of adverse tax consequences if they buy insurance on the exchanges.
"For most people who are offered coverage by their employer, they are not eligible for subsidies in the exchanges," she says. This assumes that the employer's health plan meets all Obamacare coverage requirements. If it doesn't, the employee can seek insurance on a state exchange – often with attractive subsidies.
But even if the plan meets Obamacare standards, the employee can seek coverage on an exchange and possibly qualify for tax credits on his health insurance premium if the annual insurance premium for the employee's individual coverage (excluding family members) exceeds 9.5 percent of the employee's household income.
The exchange notice from employers must also inform employees about the possible tax consequences should they buy insurance on a state exchange rather than from the employer. The message may look like this model exchange notice from the U.S. Department of Labor:
"If you purchase a health plan through the marketplace instead of accepting health coverage offered by your employer, then you may lose the employer contribution (if any) to the employer-offered coverage. Also, this employer contribution – as well as your employee contribution to employer-offered coverage – is often excluded from income for federal and state income tax purposes. Your payments for coverage through the marketplace are made on an after-tax basis."
Compare after-tax coverage costs from employers and exchanges. Even if employees are eligible for premium subsidies on a state exchange, they should compare their after-tax cost of coverage on the exchanges with how much they would pay out of their own pocket in pre-tax dollars for their employer plan. Some employers may help their employees with this calculation, but they're not required to do so under the new law, according to Kevin Kuhlman, manager of legislative affairs for the National Federation of Independent Business.
Obamacare also includes a separate set of insurance exchanges for small businesses, known as the Small Business Health Options Program, or SHOP. Eventually, these exchanges will offer employees from small businesses a range of different health plans. However, they currently have limited capabilities, especially with the exchanges that have been set up in most states by the federal government. "In those states with the federally facilitated SHOP, they can only enroll employees in one plan," Kuhlman says.