Preparing your business for health care reform

Supporting you in a time of change

Under the Affordable Care Act (ACA), small businesses will have more choices than ever when it comes to health care coverage. As you work to understand the decisions you're facing, we're here to support you in:

You may want to start by downloading our guide to health care reform. Use it along with the information below to understand what your options are and how you need to prepare. You can also rely on your Kaiser Permanente representative as a knowledgeable resource who can answer your questions and find the best solutions for your business.

Important changes in the small business market

Several key provisions of the ACA will have a substantial impact on small business groups, including:

  • Small business tax credits — Small businesses that provide health coverage for their employees may be eligible for a tax credit of varying amount if they purchase coverage through Covered California, depending on whether groups are for-profit or tax-exempt.
  • Employer shared responsibility — Employers with 50 or more full-time-equivalent employees that don't offer minimum essential coverage to full-time employees and their child dependents may face tax penalties. This provision is known as employer shared responsibility and requires these employers to report information on health coverage provided to their full-time employees on their tax returns. Employers won't be required to report on health coverage on their 2015 tax return and won't face penalties until the 2015 tax year (with payment due in 2016), but the Internal Revenue Service is encouraging them to voluntarily comply in 2014. All other employer requirements for 2013 and 2014 remain in effect.

Rating reforms

The ACA makes a number of changes that affect how small group health plan rates will be calculated in 2014. However, the rate changes will only affect nongrandfathered plans — grandfathered plan rates will be calculated using the same factors used in 2013:

20132014 and beyond
  • 7 age bands, no ratio rules
  • Family tier rating
  • 9 rate areas
  • Risk adjustment factors (.9–1.1)
  • 45 age bands, 3:1 max ratio
  • Member level rating
  • 19 rate areas
  • No risk adjustment factors

For more information on rating reforms, read more or download our fact sheet.

Your options with Kaiser Permanente

Small businesses can choose from a wide range of plans to meet their needs, including:

  • Copayment plans
  • Deductible plans
  • Preferred provider option (PPO) plans1
  • Dental plans*

Coverage inside Covered California

Covered California has specified standard qualified health plan designs in each metal tier for issuers to use in addition to their own plan designs, which may incorporate some additional benefits. You'll be able to choose a metal tier, and employees will then select a plan and carrier within that tier. Employers with 24 or fewer full-time-equivalent employees may also be eligible for a tax credit for coverage purchased through the SHOP. You can find a full list of available plans at coveredca.com.

Coverage outside Covered California

All Kaiser Permanente SHOP plan designs will be available directly from us at the same price. However, tax credits for certain employers with 24 or fewer full-time-equivalent employees will only be available through Covered California. We'll also offer a suite of plans available only by contracting directly with Kaiser Permanente.

Matching existing coverage to new plans

If you have a nongrandfathered plan, we'll match your existing coverage to a qualified plan at your 2014 renewal. We'll align the plans as closely as possible based on actuarial value, product design, and product type (copay, deductible HMO, health savings account, health reimbursement arrangement). And while we'll handle the initial matching of plans, you'll be able to select the plan you want from our new portfolio.

Explore ways to provide health coverage in 2014

If you need more guidance, try our new small business health care reform advisor tool. Just answer a few simple questions and the online tool will help you decide whether it's best to offer coverage through Kaiser Permanente or the Small Business Health Options Program (SHOP) — or advise employees to visit the individual marketplace. You'll also find out how each option works and what steps you may need to take to comply with health care reform.to find out the best way to offer health coverage for 2014.

1 Offered by the Kaiser Permanente Insurance Company.
2 The U.S. Department of Health and Human Services also refers to exchanges as health insurance marketplaces. On this Web page we use the more widely known term exchange.

Align your strategy with the ACA

In addition to selecting a plan and benefits, small groups will have many other decisions to make.

Keep coverage under grandfathered status

The decision to retain grandfathered status may have various rate impacts that small groups should consider:

Rate impactGrandfathered plansNongrandfathered plans
Premium trend Yes Yes
Subject to ACA fees Yes Yes
SHOP participation fee No Yes
Benefit and cost-share changes No Yes
Elimination of risk adjustment factor No Yes
Market-based risk adjustment No Yes
Member level rating No Yes

Kaiser Permanente will continue to support grandfathered plans. Other insurance carriers may support or eliminate grandfathered plans. To learn more about grandfathering, download our summary of the grandfathered plan rules.

Purchase directly from carrier or through the SHOP

You'll have the option of continuing to purchase directly from a carrier or through the SHOP. Here's a breakdown of factors to consider from each option:

Carrier directSHOP
  • Choice of all SHOP plans, plus other plans not offered in the SHOP
  • Ability to offer multiple metal tiers
  • Retain grandfathered status
  • No re-enrollment required
  • Continue ongoing relationship
  • Employee choice of carrier
  • No minimum participation
  • Consolidated billing and enrollment
  • Defined benefits platform
  • Plan comparison tools
  • Potential tax credit

Dropping coverage

Some small group employers that currently offer health care coverage to their employees will continue to do so because it makes sound financial and business sense for their organizations. Others will find they no longer have an economic incentive to offer health benefits. If you're considering dropping coverage, you may want to think about:

  • the potential impact on employee morale and loyalty
  • how it could increase employee turnover, affecting your short- and long-term business goals
  • whether dropping health care benefits would affect your ability to improve employee health and productivity
  • what steps you would need to take to transition from your current benefits strategy into a new one that doesn't include health care coverage

If you decide group coverage isn't a viable strategic option — or if you have employees who aren't eligible for the group plan — employees can buy coverage directly from Kaiser Permanente or through Covered California.

If you choose to drop coverage, you can help your employees enroll directly through Kaiser Permanente or the individual exchange. Covered California's website has details on standard plan designs. We're offering six plans for individuals in the exchange:

Plan TypePlatinumGoldSilverBronzeCatastrophic
Copay X X X X X
Coinsurance          
Health savings account       X  

 

Tools and resources

As the implementation of the ACA continues, we're here to help you stay up-to-date on health care reform. You may have received our letters and newsletters with information about reforms, and you can always visit kp.org/reformforsmallbusisness/ca to learn more. And remember, you don't need to take any action at this time.