The Affordable Care Act or Obamacare is a 2010 health care reform law that is designed to give individuals better and affordable access to health care. The Affordable Care Act will also make substantial changes on employee benefits and healthcare since many people currently receive their health insurance through their employers.
How Are Employee Health Benefits Affected by the ACA?
Employers that have not previously offered healthcare insurance to their employees may now be required to offer it depending on how many employees are within the company. Businesses that have 50 or more full-time employees are required to offer healthcare insurance to all their employees staring January 1, 2015 or will face a penalty.
Small businesses that have 25 or fewer full-time employees are not subject to mandatory healthcare insurance requirements, but are eligible for a tax credit of they provides healthcare insurance to their employees.
When Are Employee Health Benefits Effected by the ACA?
Employer mandate regulations affecting healthcare benefits go in to effect starting January 1, 2015. Employers that have between 50 and 99 full-time full time employees have until 2016 to comply with the new regulations. Employers that have 100 or more full time employees must comply with starting January 1, 2015 or the month that the existing healthcare plan renews in 2015. Employers with fewer than 50 full-time employees do not need to comply with the new healthcare regulations that take effect in 2015
Employers who do not want to pay a penalty can take the following steps to comply with the new mandated employer regulations:
- Count the number of employees that are working full-time at your business
- Determine whether healthcare coverage is offered to at least 70% of your full-time employees
- If you have an existing plan, determine whether the plan will maintain for the 2015 plan year
- Determine if the existing plan has all the required additional patient rights and benefits required by ACA (e.g. preventive care, costs sharing)
- Review your existing plan’s out-of-pocket maximum and make sure it complies with the ACA limits for 2015 ($6,000 for single and $13,200 for family coverage)
- Work with advisors to monitor additional requirements under the HIPAA and ACA requirement
Who Is Considered a Full-Time Employee?
Under the ACA laws, a "full-time employee" for penalty purposes are any employees who work an average of 30 hours or more per week or 130 hours or more hours per month. This includes any of the following paid hours: vacation, holiday, sick time off, paid layoff, jury duty, military duty and paid leave of absence under the Family and Medical Leave Act.
Employees who are not full-time include non-W-2 leased workers, contract workers, sole proprietors, partners in partnerships, real estate agents, and direct sellers.
When Are the Penalties that Employers Face?
Under the ACA employer penalty regulations, any large employers that do not offer the new mandated healthcare coverage to their full-time employees will be subject to penalties if any full-time employees receive a government tax credit. The employer who fails to provide healthcare coverage will have to pay a penalty of $3,000 for each full-time employee who receives a government premium tax credit.
To avoid penalties, employers must meet all requirements under the ACA by 2015 if they are currently have more than 50 full-time employees by 2015. This means that coverage must be offered to all full-time employees and their dependents. Dependents under the ACA are defined as children under the age of 26. Spouses are not determined to be dependents.
Do Employers Receive Tax Credit for Offering Health Insurance?
Not all employers are eligible to receive tax credits for offering healthcare insurance to their employees or paying their employees healthcare premiums. Federal law gives tax credit to only eligible small business employers who provide healthcare coverage to their employees. A small business employer is eligible to receive tax credit if:
- The business has fewer than 25 full-time employers
- The average annual wage of its employees are less than $50,000
- The business pays at least %50 of premium cost of employees healthcare coverage
Should I Consult an Attorney?
Employers subject to the mandated healthcare reform regulations under the Affordable Care Act should consult a business lawyer or an employment lawyer to determine whether they are in compliance with all the ACA rules that go into effect in 2015.