Regardless of your opinion of the Affordable Care Act / Obamacare, it is law. As an employer, you are required to comply with various mandates and reporting requirements, or pay fines.
Since the ACA's passing, ABM Insurance & Benefit Services, Inc., with our agents, have been working with employer groups of all sizes and our insurance providers to help them create a viable plan, satisfy the mandates and provide the necessary compliance that will help prevent them from paying the large fines that are associated with the ACA.
Small Group - Less than 50 Employees
Companies employing fewer than 50 full-time or full-time equivalent employees are exempt from the Pay or Play Mandate. The Pay or Play mandate is the law which states that companies employing 50 or more full-time workers must provide health insurance for their employees and will be penalized with fees if they fail to do so.
Changes for Companies Employing Fewer than 50 Full Time Workers
All companies who sponsor a group health plan and have an employee count under 50 will be subject to community rates. Group plans for fewer than 50 employees will no longer have a tiered rating system of employee only, employee plus spouse, employee plus children or employee plus family, but instead will have different rates for each age of an employee. The rating system will have a 3:1 premium difference for all ages, meaning that the youngest employee will only be 3 times less expensive than the oldest employee of the group. Carriers are now permitted to add surcharge to the premium for employees who are tobacco users. Many carriers are choosing not to implement a tobacco surcharge right away; however they could start using it in the future. However, carriers are no longer allowed to charge different rates due to gender or pre-existing medical conditions. Deductible limits and out-of-pocket costs are also capped at a certain dollar amount. The addition of Essential Health Benefits and new taxes and insurance fees being added to the premium bill will also have an impact financially.
Companies employing 50 or more full-time and/or full-time equivalent employees are subject to the Pay or Play Mandate. This means you are now required to offer your employees health insurance or you must pay a penalty.
How to Determine the Number of Employees in Your Company
To determine the number of full-time equivalents, add up the total number of hours worked by your part-time employees and divide it by the number of hours a full-time employee would work in that period. This will tell you how many full-time equivalent employees you have. For example, two part-time employees who work 15 hours a week would equal one full-time equivalent employee working 30 hours a week. If you employ 50 or more full-time employees or full-time equivalents, you are subject to the Pay or Play Mandate which means you must offer your employees health insurance or pay a penalty. Click here for the IRS guidance regarding FTE Employees.
If you do not employ 50 employees or more, you are not subject to the Pay or Play Mandate and will not be penalized for not offering health insurance. However, your health insurance plan will now only use modified community rates which could increase the costs of providing coverage for your company.
What are the penalties for not complying with the Pay or Play Mandate?
Employers who do not comply with the Pay or Play Mandate risk an annual a fine of $2,000 per full-time employee minus the first 30.
If your company offers health insurance which does not cover the Essential Health Benefits as mandated by ACA and/or does not pay at least 60% of covered health care expenses, your employees will have the option to shop the Exchange and receive a tax credit. However, your company will be penalized $3,000 for every employee who receives a tax credit. The maximum penalty for an employer is the equivalent of $2,000 per employee minus the first 30 employees. This maximum penalty would be the same as if you did not provide coverage at all as an employer.
If you provide health insurance that covers Essential Health Benefits and pays for at least 60% of covered health care expenses, but you have employees who would have to pay more than 9.5% of their family income for employee only coverage, those employees also have the option to shop the Exchange and may be eligible for a tax credit / Subsidy.
As of 2014, all Americans must maintain a health insurance policy that covers, at least 60% of eligible expenses or pay a fine. The fine for 2015 is 2% of the gross annual family income. This amount increases in 2016 to 2.5%. Tax credit / subsidies may be available.
Click Here for Individual Mandate Video
Click Here for a Tax Credit Subsidy Calculator
Click Here for an individual insurance quote.
Which employees are eligible for a tax credit or subsidy?
Individuals earning between 100% and 400% of the federal poverty level are eligible for subsidies if they purchase insurance through the Exchange. For a family of one, 100% of the federal poverty level is $11,490 and 400% is $45,960. However, if an employee has access to a qualified, affordable employer sponsored health plan, the employee and their family members do not qualify for the subsidy. Affordable coverage means that the premium for employee only coverage would not exceed 9.5% of the employee’s household income.