The implementation of the Affordable Care Act’s Employer Mandate is just a year away, and many business owners still don’t quite understand what their obligations are under the new law. If you own a small to mid-size business, your obligation to provide health care coverage to your employees will depend on how many full-time workers you employ and what their average annual wages are.
If your business employees fewer than 50 full-time employees, you will not need to offer health care coverage under the ACA Employer Mandate. You should know, however, that for the purposes of the ACA, a “full-time employee” is someone who works 30 hours a week or more over a given month. You can look back over the past three to 12 months when calculating who is not a full-time employee. Employees who work fewer than 30 hours a week on average during the look back period are considered part-time employees.
The ACA acknowledges that very large firms may choose to cut employee hours in order to save on health care. The law attempts to nip this practice in the bud by requiring businesses whose total employees have worked the equivalent of 50 full-time employees’ hours to provide health care coverage for all full time employees. Under this requirement, businesses will have to add up all part-time employees’ paid hours for a given week and divide them by 30, the number of hours a full-time employee works in a week under ACA guidelines. The resulting sum is the number of “full-time equivalent” employees the business has.
For example, if your business employs 20 part-time workers at 24 hours a week, for a total of 480 part-time employee hours a week, those 20 workers can be said to be the equivalent of 16 full-time workers, because 480 divided by 30 equals 16. Add your number of full-time workers on to that number. For example, if you have an additional 30 full-time workers, you add that number to your full-time equivalent number, to arrive at your total full-time equivalency of 46 workers. If this business were yours, you would not be required to provide health insurance under the Employer Mandate.
Starting in 2015, all businesses with 50 or more full-time employees, or the combined equivalent thereof, will need to start offering health insurance coverage to their employees. The insurance you provide must meet certain guidelines established by the ACA — it must provide minimum coverage equal to the bronze plan available on the health care exchange, and it must be affordable.
What constitutes affordability? Your employees should be paying no more than 9.5 percent of their yearly income for health insurance coverage for their entire family. While you can’t really know what any employee’s yearly income is — after all, they’re probably getting income from a spouse, investments or a second job — you can make sure you’re in the clear on the affordability requirement by offering insurance that costs less than 9.5 percent of each employee’s yearly salary.
How can you tell if the insurance plan you choose offers minimum coverage? Minimum coverage is coverage that’s equivalent to a bronze plan on the marketplace, which must cover a minimum of 60 percent of health insurance costs on average. If you have under 50 employees, you can choose coverage from the Small Business Health Options Program, or SHOP Exchange. Coverage purchased on this exchange should meet the minimum coverage requirements and you may be eligible for a tax credit. You may want to get help from a professional employer organization (PEO) in navigating SHOP and choosing a plan that meets your employees’ needs and those of your business.
Start preparing for the ACA Employer Mandate in 2015 by talking to your staff about their coverage preferences. Staff members getting insurance through their spouses may already be satisfied with their coverage, but there’s a good chance many of your employees have questions and concerns. Find out what your employees want and need in a health care plan. This will guide you in choosing the best plan for everyone’s needs.
Spend the next year putting together your plan of attack for when the Employer Mandate rolls out in 2015. Don’t wait for changes or further delays to occur — you could be left high and dry without a health care plan for your workers. Ideally, you want to have a strategy by mid-summer 2014 so you can educate your employees about their new health care options. Get help from a PEO to go through your options on the public and private exchanges. When you enlist the help of a PEO, you won’t have to worry about compliance issues cropping up down the road.
Don’t wait till the last minute to comply with the ACA’s Employer Mandate, contact a National PEO representative to help you with the transition. The sooner you’re ready for the implementation next year, the smoother it will go for your business.Back to blog list