The health care system in Vermont is poised for a major overhaul in 2013, as health insurance shifts from a predominately employment-based system to a health care exchange-based system that is not tied to employment. While we will not know exactly how such a system will be financed until the legislature begins considering that issue in January of 2013, we do know that changes are coming. You do not need to wait to see how that debate turns out to start preparing for the changes that Vermont’s health care reform will bring to your business and employees.
We have previously addressed some of the fundamental issues business owners need to understand about the new system – including among others, what an exchange is, and some of the tax benefits available to businesses and individuals and families under the new system.
If you have a business in Vermont, whether or not you currently offer health insurance to your employees, you will need to ask yourself some fundamental questions to prepare for the advent of the health insurance exchange next fall. You may decide not to offer health insurance, but to make the right choice for your business, it is vital to understand a few key issues.
In this post, we touch on some of the key issues that will determine if, and how, such an exchange may apply to your business. Here are 8 questions to ask to better understand how your business will be classified under the new system.
1. Am I a Small Business?
You are a small business if you employed an average of 50 or fewer full time employees during the preceding calendar year. Employers with up to 50 employees will have to buy health insurance on the exchange, called Vermont Health Connect, if they intend to offer health insurance to their employees. Vermont Health Connect will be the only place small businesses and individuals will be able to purchase health insurance – no other market will exist for these two groups.
Self-employed persons are considered to be small businesses.
Starting in 2016, small employers will be defined as having 100 or fewer employees, on average, during the preceding calendar year. At that point, employers employing 100 or fewer people will have to buy health insurance on Vermont Health Connect.
Starting in 2017, all employers, regardless of size, will be required to buy health insurance on Vermont Health Connect.
2. How many employees do I have?
The “50 or fewer” employee trigger for purchasing health insurance on Vermont Health Connect means the employer had a least one and no more than 50 full-time employees on at least 50% of the working days in the preceding calendar year. A full-time employee in this case is defined as an employee who works 30 or more hours per week. Part-time employees, therefore, are not counted in the “50 or fewer” tabulation.
Vermont Health Connect will be providing an employee calculator to help employers figure out their size. The Vermont Health Connect website is found here.
3. Are owners of small businesses considered employees?
Yes, as long as they work on average at least 30 hours per week.
4. What is the relevant time period for determining the number of employees?
You count the number of employees you employed the previous calendar year. You must have employed 50 or fewer full-time employees for at least half of the working days during the previous year. Vermont Health Connect will begin to operate in October 2013, so presumably business owners will be looking back to the total number of full-time employees in 2012.
5. If I grow to over 50 employees after I’ve bought on the exchange, what happens?
Nothing. Once you are buying through Vermont Health Connect and you exceed 50 full-time employees, nothing happens. Even if your business grows, you will not get kicked out of the exchange as long as you continue to offer your employees health insurance through the exchange. Remember, the size limits are temporary only, so starting in 2017, regardless of your size, if your business offers health insurance to its employees, it will have to offer health insurance through the exchange.
6. What if I am a Vermont employer with workers who live in multiple states?
If you have 50 or fewer full-time employees, you may offer health insurance to all your employees through Vermont Health Connect. It does not matter where your employees live and work as long as you are a “qualified employer” under Vermont’s health reform law. From 2013 through 2015, you are a “qualified employer” if you employed, on average, 50 or fewer employees during the preceding calendar year, your principal place of business is in Vermont, and you elect to provide coverage of your employees through Vermont Health Connect, regardless of where the employee resides.
Starting in 2016, the size of qualified employers will increase to employers with 100 or fewer employees, and in 2017, size will no longer matter.
7. What if I am a Vermont employer with worksites outside Vermont?
The answer is the same as above. The definition of “qualified employer” includes employers that have a principal place of business in Vermont and elect to provide coverage to their full-time employees through the exchange. So, you can offer coverage through Vermont Health Connect to all your full-time employees regardless of whether they work in Vermont or at one of your out-of-state sites.
8. What if I am an employer from outside Vermont with Vermont facilities?
Your business may still elect to provide coverage through the Vermont health benefit exchange for all of your full-time employees who are principally employed in this state. The definition of “qualified employer” includes out-of-state companies who meet the size requirements (50 or fewer full-time employees starting in 2013) and choose to offer health insurance through Vermont Health Connect to their full-time employees who are principally employed in Vermont.
The answers to these questions are simply a starting point for understanding how your business will proceed to comply with the new law. You first need to understand how the size of your business affects your responsibilities, which then helps you to start thinking about the costs and benefits of offering health insurance to your employees.
There are, of course, many other questions to address. For example, larger businesses (above a 50 full-time equivalent employee threshold) need to understand the assessment that will be due if the business either fails to offer coverage or the coverage offered is unaffordable. And both large and small businesses need to understand their employees’ responsibilities under Vermont law and how the federal law and Vermont law dovetail or diverge.
We will cover these and other topics in future blog posts as we continue to explore health care reform issues to help businesses understand and prepare for the changes that are coming. In the meantime, if you want additional information, we encourage you to visit the State’s health reform website.
The information provided in this blog is generic and based on the general definitions and provisions in the new legislation (Acts 48 and 171). This blog post and the information it contains should not be interpreted as legal advice for any specific situation. Individuals with specific questions about their business are encouraged to consult an attorney.
Image by ernstl on flickr.