Shopping for small business health insurance can be overwhelming. Throw in the alphabet soup of acronyms and abbreviations, and it can feel like you’re traveling abroad without a translation app. Not to worry, CO— has you covered.
Here are the ten most important letter strings in the health insurance lexicon:
ACA: Affordable Care Act. Enacted in 2010, this comprehensive health care legislation changed the health insurance landscape. It is very much a work in progress.
AHP: Association Health Plan(s.) These are insurance plans offered to small businesses in the same group, association, geography or industry. AHPs are noteworthy because the category rules have changed, allowing more small employers and sole proprietors to shop for insurance the way a large business would.
ALE: Applicable Large Employer. Broadly defined as businesses with more than 50 full-time (or full-time equivalent) employees, a business with this classification is required by the ACA to offer qualifying health insurance to its employees and meet the associated reporting requirements.
FTE: Full-Time Equivalent Employee. An FTE can be one employee working full time or the equivalent in part-time employees. To arrive at this figure, total the hours worked by all part-time employees in a given week and divide that sum by 30 (the number of hours the ACA has defined as full time). Add that to the number of full-time employees to determine the total FTEs.
[For everything you need to know on buying small business health insurance, check out our small business health insurance guide.]
FSA: Flexible Spending Account. This employer-administered benefit takes money from the employee’s paycheck pre-tax. These funds are then available to the employee for qualified medical expenses, such as deductibles and copays. Use of these funds is time sensitive.
HRA: Health Reimbursement Arrangement. Funded by the employer, these plans pay tax-free money to employees for qualified expenses. The list of acceptable expenditures is long, including over-the-counter medications if they are prescribed by a doctor.
HSA: Health Savings Account. A consumer directed, tax-favored savings account, which must be paired with a high deductible insurance plan. Withdrawals are not taxed if used for qualified health expenses (including dental and vision).
MEWA: Multiple Employer Welfare Arrangement. MEWAs were established as a way to offer health coverage (and certain other benefits) to employees and owners of two or more companies, as well as the self-employed. While MEWAs are marketed as a low-cost alternative for small employers, there has been mismanagement and fraud by some plan operators. Regulators are tightening regulations, but caution is advised.
QSEHRA: Qualified Small Employer Health Reimbursement Arrangement. This is a system through which small (less than 50 employees) businesses, who do not offer health insurance, reimburse employees for the cost of obtaining it elsewhere. Reimbursement is a key word here. Employees must have insurance and they must spend the money first, then provide proof of the expense to be repaid.
SHOP: Small Business Health Options Program. The ACA’s small business health insurance marketplace, SHOP is available to employers with fewer than 50 workers. This is where small businesses go to learn about their options. Many states have their own marketplaces and healthcare.gov will direct employers to them.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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