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THE AFFORDABLE CARE ACT – Could Your Business Face Penalties in 2016?

Who has to comply with the Affordable Care Act (“ACA”)?

Businesses with 50-99 full time and Full-Time Equivalent (“FTE”) employees and Businesses with 100 or more full time and FTE employees.

What is a FTE employee?

A full-time equivalent employee only determines whether or not the ACA applies to you. For purposes of determining whether you have 50 or more employees, you have to consider both your full time employees (those who work 30 or more hours a week) and your part time employees (29 hours or less, who combined, make up a FTE employee). For example, if you have 40 full time employees, and 20 part-time employees who work an average of 24 hours a week (17.3 FTE employees)[1], you actually have a total of 58 employees, which means that the ACA would apply to you.

What happens if I don’t comply with the ACA?

There are two types of penalties. A more severe penalty is applied where an employer offers no coverage at all. A more moderate penalty applies if the employer offers minimum essential coverage under an employer sponsored plan. The first penalty applies if you don’t provide insurance at all, and one of your full time employees receives federal insurance subsidies in the individual exchange. In this case you will pay a penalty of approximately $2,000 per full time equivalent employee for the year (minus the first 30 employees). For example, if you have 50 full time employees, (minus the first 30 would be 20), you would be paying approximately $40,000 in penalties for the year. (If you provide coverage for some months but not others, the calculation is by the month and a little different.)

If you fail to offer coverage that meets the requirements for affordable and comprehensive coverage, the fine is $3,000 per the number of employees who receives federal insurance subsidies in the individual exchange. (Or $2,000 per full time equivalent employee whichever is less.) So again, if you have 50 employees and 3 of them get coverage on the exchange instead of using the coverage offered by you, the fine would be $9,000 (3 times $3,000).

I know the ACA applies to me, now what?

Once you have determined if the ACA applies to you, you must provide health insurance to all full time employees only (i.e. those who work 30 or more hours a week). In 2015 an employer with 100 or more employees must offer 70% of their full time employees health insurance that complies with the ACA regulations or they will pay a penalty. In 2016 both employers with 50-99 and employers with 100 or more employees must offer 95% of their full-time employees health insurance that complies with ACA regulations or they will pay a penalty. The coverage has to be both affordable and comprehensive.

What is affordable coverage?

Affordable coverage is if the “employee’s contribution for individual coverage does not exceed 9.5% of the employee’s income (or between 100%-400% of the federal poverty level).”[2]

What is comprehensive coverage?

“The plan’s share of the health insurance costs must be at least 60% of the costs of covered services.”[3]

There are additional requirements under the ACA, such as reporting, that the Act requires. It is important to ensure you properly determine whether the Act applies to you, and everything that is expected of you under the Act. For more information, or for assistance in determining whether the ACA applies to you, contact us at (614) 534-1355.[4]

[1] 24 hrs x 52 weeks/12 months= 104 hr/mo/employee. 104 x 20 ees= 2, 080 total hrs/mo for 20 ees. 2,080/120(max hr/mo part-time employees)= 17.3.

[2] The Employer Mandate-What does it Mean for your Company?, Info.sequent.biz/ACAheadache

[3] Id.

[4] Sources: http://www.hhs.gov/healthcare/rights/; The Employer Mandate-What does it Mean for your Company?, Info.sequent.biz/ACAheadache; http://www.forbes.com/sites/theapothecary/2013/05/21/employers-can-minimize-their-exposure-to-obamacares-health-insurance-mandate-by-offering-low-cost-skinny-coverage/; http://healthcoverageguide.org/affordable-care-act/shared-responsibility-requirements/#Are+small+employers+that+don%E2%80%99t+offer+health+insurance+required+to+pay+a+penalty%3F

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