The Affordable Care Act (ACA) impacts small businesses in North Carolina in several key ways: 1) Starting in 2014, the ACA requires each state to establish a Small Business Health Options Program (SHOP) Exchange to allow small businesses to purchase insurance. 2) Beginning in 2010, the ACA provided tax credits to small businesses that offer health insurance to help offset premium costs. 3) Starting in 2014, employers with over 50 employees must provide health insurance or pay a penalty.

1. The ACA and Small Business
Understanding the Impact of the
ACA on Small Businesses in NC

2. Background on the ACA
• The Patient Protection and
Affordable Care Act (ACA) was
passed March, 23 2010
– The ACA addresses issues related to
health care access, cost, and quality
• Implementation of the ACA will be
phased in over several years
– Several provisions directly impact
small businesses in NC, including
employers who do not currently offer
health insurance coverage to
employees

3. Impact on Small Business
Small Business Health • Beginning in 2014, each state will have a SHOP Exchange, a health
insurance marketplace for small employers to shop for and purchase
Options Program (SHOP) insurance
Small Business Tax • Starting in 2010, some small businesses were eligible for tax credits to
Credits help offset the cost of employee health insurance coverage
• In 2014, employers with more than 50 employees will be required to
Employer Penalties provide health insurance to their employees, or pay a penalty
• Starting in 2011, insurers must spend at least 80% of premiums on
Medical Loss Ratio health benefits/QI, or pay a rebate to covered small businesses with
50 or fewer employees (85% of premiums for large businesses).
Insurance Market • Broader insurance market reforms such as expansion of child coverage
to age 26 and elimination of lifetime maximums have applies or will
Reforms apply to many small business health insurance plans.
• In 2014, all new health insurance plans will be required to cover
Essential Health Benefits certain services as defined by the federal government (with state
input)

4. Small Business Health Options (SHOP)
Exchange
• Beginning in 2014, the ACA requires each state to establish an
online marketplace for small businesses, called the SHOP
– In NC, employers with 50 or fewer employers will be eligible to
participate initially, employers with 100 or fewer employees will be
eligible starting in 2016
– The SHOP will allow employers and employees to evaluate insurance
options with side-by-side comparisons of plans and premiums
– The SHOP will also offer simplified administration for eligibility and
billing to employers
• The SHOP will facilitate employee choice models
• If NC does not establish a SHOP Exchange, the federal government
will step in to establish one on NC’s behalf
– Regardless of who is running the SHOP, agents and brokers are still
expected to play a major role in helping employers and employees
purchase insurance through the SHOP

5. Small Business Tax Credits
• Beginning in 2010, the ACA provided tax credits to small businesses that offered
health insurance coverage to their employees
Small • Employers with under 25 FTEs and average salary under $50,000 are eligible
Business Tax for tax credits
Credits pre- • Employers must contribute at least 50% of health insurance premium costs
2014 • Maximum credit is 35% of total employer premium (25% for non-profit
employers)
Small • The maximum credit increases to 50% of total employer premium (35% for
Business Tax non-profit employers)
Credits Post- • This credit is only available for two consecutive years
2014 • Employers will only be eligible for the tax credit if they purchase coverage
through the SHOP exchange
• The tax credit levels vary by firm size and average wages
• Based on estimates from the North Carolina Institute of Medicine, small businesses
in NC may be eligible for over $200 million in tax credits

6. Employer Responsibility
• Large employers will be required to provide health
insurance coverage to employees beginning in 2014 or
pay a penalty
50 or more FTEs with 50 or more FTEs without
Less than 50 FTEs Employer-Sponsored Employer-Sponsored
Insurance Insurance
May be required to pay
May be required to pay $2,000 penalty per
Employer penalty does not $3,000 penalty per employee, if any employees
apply employee if coverage is are eligible for federal
deemed unaffordable subsidies to purchase health
insurance
Employer Responsibility under the Affordable Care Act. Kaiser Family Foundation: Health Reform Source. http://healthreform.kff.org/the-basics/employer-
penalty-flowchart.aspx

7. Premium Rebates and Insurance Market Reform
Medical Loss Ratio Requirements and Market Reforms for Insurance Offered to
Rebates Small Businesses
• Medical Loss Ratio standards were • Prohibition on lifetime/annual dollar
established requiring insurers to limits for key benefits
spend at least 80%/85% of premiums • Dependent coverage to age 26
on medical services and quality • Recommended preventive services
improvement activities or pay refunds covered with no cost sharing*
to small/large businesses and their • The group’s claims history no longer
employees. used for setting premiums*
• In 2012 in North Carolina, insurers • In 2014, premiums based only on age,
paid $900K in rebates to small geography, tobacco use, benefits, and
employers and $14.7 million to large family coverage level*
employers. • In 2014, elimination of pre-existing
condition exclusions on all individuals
* Provisions do not apply to “grandfathered” plans

8. Essential Health Benefits
• Beginning in 2014, non- • Ambulatory services
grandfathered health • Emergency services
insurance plans will be • Hospitalization
required to provide at least • Maternity and newborn care
• Mental Health/Substance Abuse
the services listed services (including behavioral
• A benchmark plan will be health)
selected to serve as the • Prescription drugs
baseline for covered services • Rehabilitative/Habilitative care
• Lab services
• All insurers must offer the • Preventive and Wellness
same (or equivalent) services services and chronic disease
as covered under the management
benchmark plan • Pediatric services (including oral
and vision care)

9. Questions