California delays ACA for small employers

California employers with fewer than 50 employees will not have to offer Affordable Care Act-compliant health plans until 2016 thanks to a new state law.

California Gov. Jerry Brown signed California Senate Bill 1446, sponsored by Sen. Mark DeSaulnier (D-Concord) on Monday. The legislation, first introduced in February, passed through the state senate and state assembly over the past few months, following a handful of amendments that limited its scope from a two-year delay to one-year delay.

According to the legislation, small employers can continue to offer their current health care service plan contracts or small employer health insurance policies through Dec. 31, 2015.

Last year, the Obama administration delayed the employer mandate for large employers, giving HR and benefit decision-makers a one-year compliance reprieve. Also, the Internal Revenue Service said in February that employers with fewer than 100 employees will not have to comply until Jan. 1, 2016.

Also See: ACA effects on employers still to come

But, according to a transitional policy from the U.S. Centers for Medicare & Medicaid Services – first announced in November 2013 and extended in March – there is a postponement option for non-grandfathered plans in the small group and individual health insurance markets. The CMS says that this transitional policy – which is up to each state’s discretion – is available until Oct. 1, 2016.

“The signing of SB 1446 is a victory for all California small businesses, as small employers who need time to transition to Affordable Care Act compliant policies will now have additional time to make the transition,” notes California Insurance Commissioner Dave Jones.

Scott Hauge, president of Small Business California, a business advocacy organization, says that while most businesses in the state may agree that the delay is a good thing, he has a different interpretation of its impact.

“I think it’s just mucking up the system and delaying things,” Hauge explains to EBN. “It’s going to make it more difficult to implement the ACA and I think it will create problems for Covered California.”

Covered California is the state’s ACA marketplace. In addition to its focus on getting individuals covered, it also runs California’s SHOP insurance marketplace, which is offered to employers with 50 or more employees who work an average of 30 hours weekly. According to research from the Commonwealth Fund, all states except California decided to provide small employers with health choices that go beyond the federally mandated model that calls for employees to select plans from tiers slotted by their employers.

While EBN’s attempts to gain comment from Covered California on the new small business delay were not successful, the Commonwealth Fund stated that California’s SHOP offering currently includes six insurers with a total of 33 plans options – two of which are considered to be the largest by market share.

Meanwhile, David Chase, California director for Small Business Majority, stated in his testimony to a California Senate Health Committee in May that “phasing out non-compliant health insurance group plans is crucial to the success of California’s new insurance marketplaces.”

“If this bill were to become law, plans outside the SHOP would be playing under a different set of rules than plans inside it,” Chase said previously. “This could lead to premium increases and poor enrollment in the new marketplace.”

The Small Business Majority is a national advocacy group comprised of over 28 million small businesses. Previously, John Arensmeyer, founder and CEO of the Small Business Majority, said that small businesses ought to value SHOP as an option to consider and that the industry “really need[s] to forge ahead with education.”

“The fundamentals of SHOP are sound in terms of small business needs,” said Arensmeyer in a recent webinar. “It’s important to remember the starting point and that once the SHOP marketplaces are fully implemented, they will offer fundamentally significant benefits for small businesses.”

Also See: More education needed for small employers in SHOP

CMS has indicated that it plans to implement federally facilitated SHOP marketplaces for states that are not running their own by Nov. 15.

Hague, also a president and owner of CAL Insurance & Associates, an agency that specializes in providing insurance for small-to medium-sized businesses, explains that SHOP and the ACA will only work if high costs are addressed. He adds that the current delay, which was a compromise among legislators, is just “delaying the inevitable.”

“From the small business perspective, [the SHOP marketplace is] kind of our baby,” Hague says. “And prior to the ACA coming into effect, if you were going out to say what needs to be done for small businesses, the first thing out of their mouth was ‘I think we need to be able to form a pool or aggregate so that we can do purchasing with a larger number of people than we currently have.’ The SHOP concept is very near and dear to our heart.”

But he adds, “if this thing [the ACA], doesn’t drive down costs, we have an unsustainable system.”