Tuesday January 6th, 2015
Despite a controversial past and an uncertain future, the national health care law referred to as the Affordable Care Act (ACA) demands immediate attention and action by most businesses, especially those of specific sizes and structures. Employers cannot afford to risk waiting to see what potential impact on the law could result from legislation by the new Congress or the pending Supreme Court case about federal government tax-credit subsidies provided to individuals in states without marketplace exchanges.
Applicable large employer
An employer with more than 50 full-time (or an equivalent combination of full-time and part-time) employees is referred to as an applicable large employer (ALE). Beginning in 2015, these ALEs (50-99 delayed until 2016) could be subject to penalties called employer shared responsibility provisions. A full-time employee (FTE) is considered to be an individual who works for the company an average of at least 30 hours per week. If these employers do not offer affordable health plans that provide at least a minimum level of coverage to their FTEs (and their dependents), the employer may be subject to the employer shared responsibility penalty. The penalty is $2,000 times the total number of FTE (minus the first 30) if at least one FTE receives a subsidy to purchase coverage through a health insurance exchange.
If ALEs offer coverage to their full-time employees but the coverage is deemed unaffordable (at least 9.5 percent of the employees’ income for the least expensive, compliant plan) or do not provide minimum value (the plan’s share of total cost of benefits under the plan is less than 60 percent), the employers may face a penalty of $3,000 times the number of FTE receiving a subsidy for exchange coverage (not to exceed $2,000 times the total number of FTE minus the first 30 employees).
Though no employer shared responsibility payments were assessed for 2014, employers must use information about their numbers of employees and hours of service during 2014 to determine their criteria for 2015. It has been reported that some businesses have delayed hiring, brought on temporary workers or even cut staff or hours to prevent crossing the 50-employee threshold. It’s a bit late to try these adjustments now, since the number of employees is a calculated value of full-time and part-time employees over the last 12 months.
Avoiding the ACA
Adam Bluestein wrote a piece for Inc. — last updated on October 23, 2014 — called “3 Ways to Avoid Obamacare Penalties.” These strategies for employers to cut costs and avoid the penalties include: (1) going “skinny” by offering cheap, bare-bones plans, (2) steering qualified employees to Medicaid where available and (3) company self-insuring. It is recommended to consult with qualified legal and tax professionals before taking any of these actions or attempting other maneuvers of this type.
Determine your status
BusinessUSA.gov, a U.S. Government website, features a wizard that can help employers of all sizes identify the criteria that apply to their circumstances. Just click on Get Started, fill in your state, select the size category of your staff and answer whether you currently provide health insurance to your employees or not. The site processes your responses and brings up a page with information and links relevant to your ACA compliance situation.
Understanding the ACA
The U.S. Small Business Association website has a special Health Care section that lists the dates and times of free, weekly Affordable Care Act 101 Webinars for Small Employers. Topics covered include cost containment, Small Business Health Care Tax Credit, Health Insurance Marketplace and Employer Shared Responsibility. There are also separate, in-depth articles about ACA provisions for Self-Employed; Employers with Fewer Than 25 Employees; Employers with Up to 50 Employees; and Employers with 50 or More Employees.
For employers with 50 or fewer employees, the healthcare.gov website now includes a section called the Small Business Health Options Program (SHOP) Marketplace. An employer can view plans and prices, calculate FTEs and apply online for coverage by setting up an account. There’s even a SHOP Tax Credit Estimator for employers with fewer than 25 FTE who meet certain other qualifiers.
Employers, it’s time to make your move to comply with ACA requirements. Just make sure to consider all of the factors that will be most beneficial and minimize any risks for yourself, your company and your employees.