This Business Know-How article was submitted by Chamber member Michael Murphy of Platinum Exchange
Small businesses are now required to provide health
insurance to full-time employees (30 hours a week on average). This article
offers insight into how the Affordable Healthcare Act’s Employer Mandate may impact Asheville’s small businesses.
>What is the
Employer Mandate?
The Employer Mandate requires all employers with over
50 full-time equivalent (FTE) employees to provide healthcare coverage for
those full-time employees. (To calculate how many full-time equivalent
employees you have, divide your part-time employees’ (less than 30 hours per
week) monthly hours by 120 and add that solution to the number of your actual
full-time employees.) The alternative to providing coverage is to pay the
Employer Shared Responsibility Payment on the federal tax return (explained in
detail below).
Employer mandate update: An announcement came earlier this year that the
mandate has been delayed in tiers to ease the transition process: employers
with 50-99 employees will start complying with this rule in 2016; and those
with 100 or more employees will need to offer 70% of their employees’ coverage
in 2015 and 95% coverage from 2016 onward.
>Good to know, but
what if we employ fewer than 50 people?
Good news! Small operations with fewer
than 50 employees duck under the radar - they do not get penalized for not
providing health coverage to employees.
BONUS! Tax breaks for coverage for
smaller employers: If you (“you” being an employer with
fewer than 25 employees) do decide to offer coverage, you can apply for tax
breaks (up to 50% for businesses and 35% for nonprofits) for your contribution
to your employees’ premiums. To qualify, you must pay for at least 50% of the
employees’ premiums; employees’ annual wages cannot exceed $50,000; and the
insurance must be provided through the ACA Exchange Marketplace for at least
two years. These tax credits are offered on a sliding scale up to 25 employees
depending on the aforementioned qualifying factors. Please consult your tax
advisor to see if you qualify.
Sole
Proprietors (without employees): as
an entrepreneurial trailblazer, you are exempt from this conversation and
directed to the Individual ACA Marketplace for health insurance coverage.
>What if I have
over 50 employees and I am not offering coverage?
The
alternative to providing direct coverage is called the Employer Shared
Responsibility Payment, which is a fee employers pay per full-time equivalent
employee that does not receive affordable, minimum value coverage through their
employers. (See Employer Mandate Update above for relief provided for 2015 and
2016). To break down this jargon, here are a couple of scenarios:
If insurance is flat-out not offered by the
employer: the employer is required to pay an annual fee of $2000 per full-time
employee (which shows up in monthly installments but is paid as a lump sum on
the tax return). The tally starts after
the first 30 employees.
If insurance is offered but is not affordable
or does not meet the minimum value requirement: the employer
is responsible for the Employer Shared Responsibility payment, but it is
calculated a bit differently. Not meeting the affordability test means that a
full-time employee gets a tax credit because his or her coverage is not
affordable (in other words, the premium costs more than 9.5% of the employee’s household
income) or the plan doesn’t cover 60% of the total healthcare costs (minimum
value). If at least one full-time employee gets this tax credit, the payment is
$3000 flat for each employee receiving the tax credit. (This payment is subject
to certain limitations, so you will need to consult a tax advisor in this
scenario).
Simple,
right?
It’s
important for employers to note that unlike providing coverage directly, the
Employer Shared Responsibility Payment is not tax deductible.
>Where do I go to
SHOP for Employees’ Insurance?
Much like the individuals’ ACA Exchange, there is a similar marketplace
just for you as employers. It’s called SHOP: Small Business Health
Options Program. One great aspect of SHOP is that there is no
open-and-closed enrollment period – employers can purchase insurance any time
throughout the year.
Qualifying employers can use SHOP to compare and purchase
group plans for their employees. One of the many qualifiers is that SHOP is
only available to operations with fewer than 50 full-time employees in 2014. In
2016, the SHOP will be expanded to employees with fewer than 100 employees. This
marketplace creates a large collective of small business customers, which, in
theory, generates more buying power and better plans that were monopolized by
large firms in the past.
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