Small Businesses and the Affordable Care Act

You know the value of providing health insurance to your employees.  But the legal technicalities can be a real challenge for small businesses.  The Affordable Care Act offers rights and protections, choices and tax credits; but what about mandates, restrictions and penalties?  On average, small businesses pay about 18% more than large firms for the same health insurance policy because they lack the purchasing power that larger employers have.  Below are some key points that may affect your small business.

Is My Business Covered?

If you have up to 25 employees, pay average annual wages below $50,000 and provide health insurance, you may qualify for a small business tax credit of up to 35% or your premium contribution (up to 25% for non-profits) to offset and bring down the cost of providing insurance to your employees.  The maximum credit will be available to employers with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000.  To be eligible for a tax credit, the employer must contribute at least 50% of the total employee premium cost.  Businesses that receive state health care tax credits may also qualify for the federal tax credit.  Dental and Vision care qualify for the credit as well.  For 2014 and beyond, small employers who purchase coverage through the new Health Insurance Exchanges can receive a tax credit for two years of up to 50% (up to 35% for non-profits) of their contribution.

Do My Retired Employees Qualify for Any Programs?

Under the health care law, employer-based plans that provide health insurance to retirees ages 55-64 can now get financial help through the Early Retiree Reinsurance Program.  This program is designed to lower the cost of premiums for all employees and reduce employer health costs.  Health insurance premiums for older Americans are over four times more expensive than they are for young adults, and the deductible these enrollees’ pay is, on average, almost four times that for a typical employer-sponsored insurance plan.  Businesses, other employers, and unions that are accepted into the program will receive reimbursement for medical claims for early retirees and their spouses, surviving spouses, and dependents.  Savings can be used to reduce employer health care costs and provide premium relief to workers and their families.  Applicants who are approved into the program receive reinsurance for the claims of high-cost retirees and their families (80% of the costs from $15,000 to $90,000).  The program ends on January 1, 2014 when State health insurance exchanges are up and running.

What Options Are Available for Small Businesses?

In 2014, small businesses with generally fewer than 100 employees can shop in an Affordable Insurance Exchange, which gives you power similar to what large businesses have to get better choices and lower prices.   Access to purchase health insurance coverage through the exchange is limited to citizens and lawful residents. Individuals with income up to 400 percent of the federal poverty level (FPL) may be eligible for premium subsidies and cost sharing reductions for coverage purchased through the exchange.  Exchange eligibility determinations must be streamlined and coordinated with eligibility determination for Medicaid and the Children’s Health Insurance Program (CHIP).

What Is a Qualified Health Plan?

A qualified health plan is a health plan that is certified to provide essential health benefits and is offered by a health insurer licensed and in good standing to offer health insurance coverage who agrees to offer at least one qualified health plan in the silver level and at least one plan in the gold level, who agrees to charge the same premium rate for each qualified health plan in and out of the exchange, and who complies with other requirements of the exchange.    Qualified health plans will have a minimum actuarial value and be categorized according to their actuarial value as Bronze, Silver, Gold, or Platinum.

What are the Minimum Coverage Requirements?

Essential health benefits adopted by Health and Human Services (HHS) will be the minimum coverage requirements for qualified health plans that include at least ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care.

 What If I Have Less Than 50 Employees?

Employers with fewer than 50 employees are exempt from new employer responsibility policies.  They do not have to pay an assessment if their employees get tax credits through an Exchange.  The Affordable Care Act does not require employers to provide health insurance for their employees.  The Employer Responsibility provision of the Affordable Care Act applies to businesses with more than 50 full-time workers.  In 2014, the Affordable Care Act will require large employers to pay a shared responsibility fee only if they do not provide coverage and taxpayers are supporting the cost of health insurance for their workers through premium tax credits.

Is There Anything on the Internet That Might Help?

In 2010, the Department of Health and Human Services established a new consumer website with easy to understand information about affordable and comprehensive coverage choices.  The website also provides information to small businesses about available health coverage options, including information on reinsurance for early retirees, small business tax credits and how to shop for insurance in the Exchanges that will increase the purchasing power of small businesses.

For more information, please contact your agent or Hill Insurance Agency LP.

Hill Insurance Agency LP is an independent insurance agency and a member of the Independent Insurance Agents of Texas (IIAT).  We represent a number a national and regional insurance carriers, and have broker relationships with access to over 200 carriers.

Resources:  Healthcare.gov, Department of Labor, Internal Revenue Service and Texas Department of Insurance

This article provides information about the law designed to help users with their business needs.  But legal information is not the same as legal advice — the application of law to a business’ specific circumstances and needs.  Although we make efforts to ensure our information is accurate and useful, we recommend you consult a lawyer if you want professional assurances that our information, and your interpretation of it, is appropriate to your particular situation.

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Can my child take our insurance to college?

My son (daughter) is leaving home to attend college this fall.  Will my auto and homeowners insurance policies cover him (her) while at college?

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This is a great question, and one that our customers ask frequently.

When college students move from home to their home-away-from-home – a rented dorm or apartment – insurance issues can arise and should be addressed before they leave home.

One key question that arises in discussing these issues is whether the student is still considered a resident of your household.  This is a legal question, but your homeowners and auto policies both contain provisions that apply the broadest coverage available in those policies to persons who are legally considered residents of your household.

It is generally accepted that students living away from home while attending college are residents of their parents’ household. Based on previous Texas court decisions, the real test is whether the absence of a person from the household is intended to be permanent or only temporary – whether there is physical absence coupled with intent not to return. This leaves a great deal of room for interpretation. There may be borderline cases that require you to think about alternatives. For example, it may be difficult to consider a 23-year-old graduate student living in an apartment year-round to be a resident of your household.

Homeowners Policy
Your homeowners policy covers personal property owned or used by a resident of your household while the property is located anywhere in the world.

However, most policies limit the amount of coverage on personal property to 10 percent of the amount shown on the policy for personal property, when the property is located at another residence away from the home address.

Look at your policy and find the limit provided for personal property.  Take 10 percent of that amount, and then think about the items your student has taken to college:  clothes, TV, computer, other electronics, furniture, and household items.  How much would it cost to replace all those items if they were all lost at the same time in a fire or other catastrophe?

In addition to the dollar limitation, some policies don’t cover theft of personal property from the student’s residence, except while the student is temporarily living there. This is a definite problem, especially when the apartment is owned, or rented for a 12-month term, and the student comes home for the summer.

Your homeowners policy also provides liability coverage in case a family member is legally liable for another person’s injury or damage to another person’s property.  This coverage clearly applies to accidents at home or away from home, but some policies limit the coverage when an accident occurs at an owned or rented residence other than the family home.  Some insurance companies offer liability coverage at separate residences for an additional cost.

After all of the above information is considered, it’s easy to see there are potential coverage gaps in your homeowners policy when a student leaves home for college. That’s why we recommend that you purchase a separate tenant or renter’s homeowners policy for the student’s residence, whether it is an apartment or a dorm room.  The cost of such a policy is small compared to the benefits it provides.

 Automobile Policy

If your student takes one of your family vehicles to college, the coverage provided by your family automobile policy follows the vehicle anywhere in the United States and Canada.  This includes coverage for damage to the vehicle itself (if you have purchased such coverage on that vehicle) as well as liability coverage for injury or damage to other persons or property.

If your student doesn’t take a vehicle to college, some coverage under your policy may still apply if they are riding in or even driving a vehicle belonging to someone else.

Students Who Are Not Legal Residents of Your Household

Coverage complications can arise on your homeowners or auto policy if your student for whatever reason is not considered a legal resident of your household, as was mentioned in the first part of this article.  We encourage you to discuss your personal situation with us and your attorney.  To be safe, we will likely recommend separate homeowners and auto policies for the student.

This article was prepared and made available to Hill Insurance Agency by the Independent Insurance Agents of Texas, which is solely responsible for its content. Please read your insurance policy. If there is any conflict between the information in this article and the actual terms and conditions of your policy, the terms and conditions of your policy will apply. The Independent Insurance Agents of Texas is a non-profit association of more than 1,800 insurance agencies in Texas, dedicated to helping its members succeed, in part by providing technical resources that explain insurance policies sold to their customers.

Why should you buy insurance from an independent insurance agency?

Today’s consumer has three choices when making a decision to purchase insurance products:

  • independent agent
  • captive agent
  • direct writer

An independent agent is one who is self-employed, is paid on commission and represents multiple insurance companies. Independent agents save customers time by shopping on their behalf for both the best price and the best coverage.

A captive agent or exclusive agent is an employee of only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s captive company (State Farm, Farmers, Liberty Mutual, Nationwide, etc.).

A direct writer is an insurance company that sells directly to the consumer with no agent involved (GEICO, USAA, Esurance, etc.).

Of the top 50 property/casualty insurance companies in Texas, ranked by total premium volume written, more than half are available to independent agents

Independent agents

  • Are free to place a client’s insurance with any company the agency represents
  • Evaluate the insurance needs of clients and recommend the best coverage to meet those needs; they do not set insurance prices or pay claims
  • Help customers through the claims process in dealing with the insurance company
  • Write 80 percent of the $12 billion in commercial insurance purchased in Texas each year
  • Handle insurance for about 1 million Texas home owners
  • Write about 2.8 million auto insurance policies every year

Hill Insurance Agency LP is an independent insurance agency and a member of the Independent Insurance Agents of Texas (IIAT).  We represent a number a national and regional insurance carriers, and have broker relationships with access to over 200 carriers.