Signed into law by President Barack Obama in 2010, the Affordable Care Act (the “ACA”) is commonly referred to as “Obamacare”. It is important for California employers to note that the ACA “employer mandate” has been delayed until 2015, although health insurance exchanges are still scheduled to start offering health coverage to individuals and employees of small businesses starting January 1, 2014. On October 1, 2013 open enrollment will begin for citizens to select their insurance providers at an exchange and coverage will begin January 1, 2014.
Under the ACA, small businesses – defined as those having 50 or fewer employees - are not required to provide health insurance to their workers. Medium and large businesses, defined by the law as those with more than 50 employees, must offer coverage starting on January 1, 2015. If employers choose not to provide health care, they will be subject to penalties which will be determined based upon the company’s size.
Businesses with 50 or fewer employees will not incur fines if they choose not to make affordable coverage available. Moreover, an employer may be eligible to receive a health insurance tax credit if it has 25 or fewer employees, to help encourage these employers to offer health insurance to their workers. Conversely, employers with more than 50 employees who choose not to provide health insurance will be subject to penalties starting in 2015.
Currently, one of the most important steps for all employers to take under the ACA is to notify employees of the health insurance centers, or exchanges. Under the legislation, notifications must be provided to employees by October 1, 2013. Employers must also send or provide the notice to new employees hired after October 1, 2013 within 14 days of such employee’s date of hire. The Department of Labor has provided a Model Marketplace Notice for employers who do not offer a health plan.
Can an Employer be Fined for Failing to Provide Employees with the Marketplace Notice?
No. The Department of Labor has issued guidance stating that employers covered by the Fair Labor Standard Act (“FLSA”) should provide a written Notice by October 1, 2013 to its employees about the Small Business Health Options Program, commonly referred to as the exchanges. However, there is no specific fine or penalty under the law for failing to provide the Notice. Employers are technically required under the FLSA to send the Notice, so employers may still want to send the Notice with at least the minimum information specified by the statute. Furthermore, employers who disregard the notice requirement may be subject to claims by employees who suffer damages as a result (for example, by not obtaining exchange coverage).
Does the Law Require that Small Businesses Provide Health Insurance?
No. The ACA does not require that businesses with 50 or fewer than 50 full-time equivalent employees (defined as 30 hours per week) provide health insurance. If your business has more than 50 full-time equivalent employees, you could be subject to penalties starting in 2015 if you do not provide insurance.
Which of my workers qualify as “full-time” or “full-time equivalent” employees?
While you may consider only those who work a solid 40 hours a week as full-time workers, the law casts a wider net and includes anyone who works more than 30 hours a week as a full-time employee. Furthermore, it takes into account “full-time equivalents.” If you have 20 employees who work 15 hours a week each, that counts as ten full-time workers.
How do my seasonal workers affect my employee count?
If your seasonal workforce bumps your full time employee count above 50 for 120 days or fewer during a calendar year, you are exempted from the employer mandate and will not be required to provide insurance to your workers.
What if I have 35 full time employees in one business I own, and 45 in another?
Since that would put your total number of employees over 50, it is likely you will not qualify as a small business and that you will be subject to the rules for medium and large employers, which have been delayed to January 1, 2015.
Does My Plan Cover Enough?
The health plan you offer to employees meets minimum value if it pays for at least 60% of covered services. The U.S. Department of Health and Human Services provides a minimum value calculator to help you determine whether a plan covers 60% of costs. To use this calculator, you will supply information such as co-pays and deductibles to come up with the final value. Please be forewarned: The calculator is a complex Microsoft Excel spreadsheet. Look for the “User Guide” tab before you get started.
If you need more help, consult a qualified insurance agent or broker.
How Much Is the Tax Penalty for Employers?
The employer shared responsibility payment mostly depends on whether or not you offer any health coverage at all. Penalties for medium and large employers are delayed until January 1, 2015 – with the calculations of penalties levied to be determined at a later date.
To find out what you may have to pay, the U.S. Chamber of Commerce offers an Employer Mandate Calculator. You can use it to estimate what your penalty could be under the new law, based on your number of full-time employees.
How Can Small Business Purchase Health Insurance for Employees?
Under the ACA, small business owners will be able to purchase health insurance for their employees on a special marketplace called “SHOP,” the Small Business Health Options Program. SHOP is run by Covered California, which also runs the new marketplace for individuals and families. SHOP will let small business owners comparison shop and buy insurance plans that may earn them tax credits. SHOP is a health insurance marketplace for small businesses with 50 or fewer full-time or full-time equivalent employees. The SHOP marketplace is designed to provide small businesses with the same purchasing clout as big business, thanks to plans negotiated on their behalf by the state.
Do I Also Have to Cover My Employees’ Families?
No. It is the employer’s choice whether to extend coverage to the employees’ family members. If an employer chooses to do so, the insurance company must offer coverage to all dependents that are eligible for the plan. The employer will decide whether to contribute to the cost of dependent coverage, and if so, how much.
When Does SHOP Open?
SHOP will open on October 1, 2013. That is when you can formally select which tier you want for your employees. Coverage will start January 1, 2014. Employers can visit Covered California for more specific information about premiums.
When can I buy a health insurance plan for my workers through SHOP?
Enrollment starts on October 1, 2013 for coverage that takes effect on January 1, 2014. Unlike the health insurance marketplace for individuals, there is no enrollment deadline, as businesses with 50 or fewer workers are not required to purchase health insurance for them.
Can I buy insurance through SHOP if I have more than 50 workers?
Not yet. Beginning in 2016, SHOP will be open to businesses with up to 100 employees.