The Affordable Care Act (ACA) will take effect in January 1, 2014. This means big changes not only for health care providers and insurers, but also for small businesses and large employers. While it’s basically going to affect everyone, employers are in a unique position to revise their policies, audit their workplace and make sure they comply with the law.
Wading through the 2,400-page bill is already daunting. Making sense of the new law poses another challenge. Here are the major aspects of the health care bill. You may want to seek legal help or consult professionals for an in-depth analysis.
The Size of Your Workforce is a Crucial Factor
The law sets different requirements depending on the number of employees a business employs. If you’re a “large” employer, then you must offer employees health care benefits or suffer penalties. Under the law, two things define a large employer:
- If you have at least 50 full-time employees or their equivalent
- If you are single or joint employer
Full-time employees are those who regularly render at least 30 hours of paid service each week. To determine other employees in full-time equivalent positions, simply add all number of hours worked by your part-time employees in a month and divide it by 120. Add this number of equivalent positions to the number of full-time employees you have each month and round the total to the nearest whole number. If you get 50 or more, then you are subjected to the penalties.
If you are a joint employer, the law requires you to combine your employee counts.
What if you’re a small business?
If you have less than 50 employees, you’re not required to offer insurance. Note, however, that there are a number of sections that specifically apply to those with less than 25 employees.
The Minimum Essential Coverage and Potential Penalties
The new law aims to provide all U.S. employees health insurance through their employers. For this to happen, it laid down a number of requirements and penalties and a workable system to benefit both individuals and businesses.
To avoid penalties, large employers have to meet the minimum essential coverage and the minimum value requirements at a reasonable cost.
There are three things to consider here. First is the minimum essential coverage, which is mostly composed of private health insurance plans. Second is the minimum value requirements, which simply means that the health care plan must cover at least 60% of the expected health care costs. Employees pay the rest through co-payments, co-insurance and deductibles. Third is the affordability of premiums. A plan is affordable if the premiums for each employee is 9.5% or less than his household income.
All of these will seriously affect large employers as they will have to meticulously track hours worked to determine full-time status and prove that they are not subjected to penalties.
Here’s a quick look at the penalties large employers can suffer if they don’t offer coverage to full-time employees:
- An annual fine of $2000 for every full-time employee who receives a subsidy through a health insurance exchange. The first 30 full-time employees, however, are not included when calculating the penalty.
- For large employers who offer coverage that is “too expensive” or not affordable, there’s a corresponding penalty of $3,000 per year or $750 per employee, whichever is less, if the employee obtains a subsidy for coverage through an exchange.
Don’t wait until this new and complicated law takes effect. Deal with the upcoming changes by keeping tabs on new developments and analyzing your workforces now.