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Subsidies try to steer small business to Obamacare (New Orleans City Business)

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Businesses with 25 or fewer full-time employees are exempt from the Affordable Care Act and won’t have to provide health coverage for their employees, but they can still take advantage of a tax credit to cover a sizeable portion of their employees’ premiums if they take part in Obamacare.

The Internal Revenue Service says these smaller businesses that currently pay at least half of their employees’ insurance costs may be eligible for the Small Business Health Care Tax Credit, which covers up to 50 percent of premiums.

The credit will be applied to plans purchased via the online Small Business Health Opportunity Program (SHOP), which will be making its digital debut this October alongside the individual health insurance exchange.

For this first enrollment period, SHOP will be geared toward businesses that typically cannot find competitively priced insurance in the traditional small group market. In the 2015 enrollment period, SHOP participation will be extended to employers with 50 or more full-time workers, but this larger group will not be eligible for tax credits.

A ballpark for premium prices in October for small businesses, with or without the credit, has not been determined. Louisiana Insurance Commissioner Jim Donelon confirmed the federal government was setting up a SHOP exchange for Louisiana, but he could not confirm which insurers will be participating or provide the number of companies that will sell coverage through the SHOP exchange.

Katie Vlietstra, director of governmental affairs for the National Small Business Association, worries that the lack of insurer participation in the SHOP exchanges will be a huge roadblock to affordability for small businesses.

“In some states where there’s only one plan available, it’s is going to be a huge struggle for small businesses to offer coverage affordably,” Vlietstra said. “I think many (that aren’t legally required to provide coverage) will look to alternatives like health savings accounts.”

In terms of the tax credit, Vlietstra said many small businesses view it as a short-term solution to the affordability problem because it expires at the end of 2014.

“Some employers offering care now and aren’t legally required to do so are taking advantage of the credit,” she said. “But a lot are worrying about what happens in two years when the credit goes away and the product is more expensive because of the increased benefit requirements.”

For an individual whose employer does not offer what the law defines as “affordable, comprehensive” coverage, subsidies are available that can be applied to insurance purchases made through the online exchange. To qualify, their annual household income must fall within 133 and 400 percent of the federal poverty level, which ranges from $46,000 to $94,000 for a family of three.

Chris Martin, a partner in New Orleans law firm Chaffe McCall’s health care section, explained that under Obamacare, affordable, comprehensive coverage means that employees are to contribute no more than 9.5 percent of their total income to their health premiums. Comprehensive means that the plan has to include 10 essential health benefits.

“So that, in percentages, means the employee cannot pay more than 40 percent of their premium costs. The employer is to pick up the other 60 percent,” Martin said.

Grandfathered plans, or those that have not been changed since 2010, do not have to include those 10 essential benefits, and include prescriptions, hospital and emergency care, and maternity and newborn care.

“Most people who have employer insurance won’t see much of a change in 2014 because many plans are grandfathered in,” Martin said. “That will change over next few years because of the need to make changes and cost increases.”

Just like businesses seeking Small Business Health Tax Credit eligibility, individual subsidy eligibility will be determined when users begin to shop the online exchanges.

“One of responsibilities of the electronic marketplace is to take your information and basically determine what are you eligible for and how much,” Martin said. “Those levels of assistance are determined on a sliding scale based on income— the less you have, the higher the subsidy.”

Unlike the Small Business Health Care Tax Credit, the subsidies for individuals have no enrollment deadline.

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