Good news for small employers (those with 2 – 50 employees in their healthcare plan) – On April 1, President Obama signed legislation eliminating the deductible limit for plans of this size. That generally means that small employers now have more flexibility to offer plans with higher deductibles – plans that can save the employers and their employees money.
The requirement, an element of the Affordable Care Act that became effective in January 2014, Required small employer plans to cap the annual deductible to $2,000 for self-only coverage and $4,000 for family coverage (for plans beginning on or after January 1, 2014).
In 2013, as carriers began to design their plans based on the 4-tiers – Platinum, Gold, Silver and Bronze, many were unable to reach these deductible limits with a bronze plan. Under the ACA, a bronze plan is required to pay for 60% of the total covered expenses under the plan.
This limitation restricted smaller employers’ ability to provide higher-deductible plans, which typically carry lower premiums, and which employers traditionally supplemented with pre-tax, account-based coverage options such as cafeteria plans or flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs).
On April 1, President Obama signed legislation eliminating this restriction entirely.
What does this mean for small employers and their employees?
Small employers are now free to provide health insurance plans with higher deductibles. That’s good news because it may result in:
- Lower premiums – for both the company and its employees
- More flexibility for employers to offer pre-tax, account-based health coverage, like flexible spending accounts, health savings accounts, and health reimbursement arrangements.
Some Limitations Still in Place
Although the $2000/$4000 deductible cap has been lifted, other restrictions remain in place for plans sponsored by employers with between 1 and 50 employees, such as:
- Out-of-pocket expenses (including in-network copays, deductibles, and coinsurance—but not premiums) are limited to $6,350 for self-only coverage and $12,700 for family coverage in 2014. (These limits increase to $6,600/$12,700 in 2015.)
- Coverage must provide essential health benefits.
- Waiting periods cannot exceed 90 days.
Questions about small employer deductibles or another ACA requirement? Leave us a comment and we’ll address your question in a future post.
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This article refers to all regulations issued through April 1, 2014. It is intended to be a summary of important issues and should not be considered legal or tax advice.
© Bell Associates and “Ask the Professionals,” 2014. Unauthorized use and/or duplication of this material without express and written permission from Bell Associates is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Bell Associates and “Ask the Professionals” with appropriate and specific direction to the original content.