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Kates Nussman Rapone Ellis Farhi, LLP

Small Businesses May Have a Potential Problem Offering Health Insurance

Insurance brokers in New Jersey are concerned that some small businesses will be forced to drop their employees' insurance coverage, as many may choose to buy federally subsidized individual health insurance, instead of signing up for insurance offered by the employer. Under state law, a small business must have at least 75% of its employees take part in its insurance plan to offer coverage to employees. So if too many employees opt out of their company's program, the employer will be unable to offer insurance to its workers. Some small businesses may drop below the 75% percent threshold if even one employee drops out.

The Affordable Care Act (ACA) created an insurance program where people can determine if they are eligible for tax credits to subsidize their insurance purchase and then buy insurance for themselves and their families. This was intended to avoid the insurance brokers' concerns. Workers whose employers offer affordable plans with a minimum set of federally defined benefits are not supposed to be eligible for subsidies and should not get credits to buy their own insurance.

But some brokers say there are potential loopholes that could affect some employees, such as recently hired employees. These workers could get subsidies and refuse the employer's insurance. Some say that changes should be made to state laws to allow employees who get subsidized insurance through the marketplace to be allowed a waiver so they can be counted toward the 75% minimum level. But insurers are cautious about making that change and say that state rules should conform to federal ones, which do not permit such a waiver.

Roughly half of New Jersey's 110,000 employers with between two and 49 employees currently offer insurance. In the short term, these employers will likely want to continue to offer coverage to workers. But it's unclear what the long-term effects of the subsidies in the individual insurance market will be on those companies. If employers drop coverage, it could benefit some employees who are eligible for subsidies, while other employees who are not eligible for them would have to pay more for insurance. Insurance regulations can be very difficult for business owners to navigate, especially when they are new. That is why it is important to at least consult with a lawyer to ensure compliance with both state and federal regulations and avoid fines, penalties, or potential lawsuits. With the assistance of Charles J. Vaccaro, J.D. Candidate May 2015

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