Health Care Reform and Your Business: What’s the Impact?
Our most recent survey of small business customers found that many with fewer than 50 employees are still struggling to keep up with pending changes that will occur in the health insurance marketplace in 2014.
2014 is when major provisions of the Affordable Care Act (Obamacare) go into effect, including mandates and new taxes. In particular, the survey showed that the employer mandate, and – more specifically – the way the law counts the number of employees working at a company is confusing to many of our customers.
They’re not alone. In fact, those rules are still being written and debated. But, the latest draft of the legislation looks like this:
The Magic Number 50 – Under health care reform, 50 — as in 50 “full-time equivalent” employees — is the magic number. Small businesses with fewer than 50 full-time equivalent employees are exempt from the law’s requirement to provide health insurance for employees, or pay a tax penalty.
Small businesses with 50 OR MORE employees - Beginning in 2014, businesses with the equivalent of 50 or more full-time employees must pay a tax penalty if they do not provide “affordable” health insurance and an employee uses a tax credit to help pay for insurance through an exchange. Here are a couple things you should know about this requirement:
- To be considered affordable coverage, the employee’s portion of the premium can’t exceed 9.5 percent of the employee’s taxable household income.
- The assessment for a large employer that does not offer coverage will be $2,000 per full-time employee beyond the company’s first 30 workers.
How do you know if you have 50 “full-time equivalent” employees – Draft regulations put out by the Department of Health and Human Services, would count a full-time employee as someone who works at least 30 hours a week, or 130 hours a month.
For employees who work less than 30 hours a week, the proposed legislation would have you aggregate their hours to determine if those hours increase the number of “full-time equivalent” employees you have. As it’s currently drafted, the law would count one full-time equivalent employee for every 120 hours worked in a month by your part-time staff.
So, for example, if you have four part-time employees who each worked 30 hours a month for a total of 120 hours, their combined hours could potentially equal one full-time equivalent employee. But, the way to determine how many hours are counted, and over what period of time those hours are counted is still being determined.
Here is a very basic example of how this might work.
The proposed rule is available on the IRS web site (http://www.irs.gov/pub/newsroom/reg-138006-12.pdf) If you have questions we encourage you to check it out or check in with your licensed eHealthInsurance agent.
Survey Results - According to our survey of small business owners with fewer than 50 full-time employees, only 44% actually knew how the mandate worked. Not bad considering how complex the new rules are. Among the employers we surveyed, less than half knew that they were not required to offer their employees health insurance next year, and that there was not a tax penalty if they failed to do so.
Given these results, we know there is still work to do to raise awareness and educate employers on these important issues. As ever, we’re here to help our customers and be a supportive advocate when you have questions.