National healthcare reform, and the passing of the Affordable Care Act (ACA) in 2010, was one of the most hotly debated and widely publicized issues of President Obama’s first term. And while it seemed like there was lots of time before businesses needed to take action, the clock is now ticking away...
There’s a lot to do and think about before October 1, 2013, when the New York Health Benefit Exchange will be ready to enroll people in health insurance programs for coverage that will be effective starting January 1, 2014.
Over the next few months, the WCA will be hosting seminars and posting the information you’ll need to know as the countdown continues to October 1st, starting with a list below of key things employers need to do and know.
1. Tell your employees about the health benefit exchange.
Employers are required by federal law to send workers a notice telling them about the new insurance marketplaces before Oct. 1, 2013. (The Department of Labor is expected to provide model generic language.) But don’t wait until then to begin educating them about the exchange. They need time to understand the differences between the health insurance coverage you provide and what will be available through the marketplaces.
2. Figure out if you need to provide health benefits or not.
The ACA does not require “small” employers, defined as organizations with fewer than 50 full-time-equivalent (FTE) employees, to provide their employees with healthcare coverage. However, you might qualify for a Small Business Health Care Tax Credit, if you have 25 or fewer FTE employees and your average annual wages are less than $50,000, should you choose to provide insurance anyway.
“Large” employers, defined as businesses with 50 or more FTE employees, will be required under the ACA to provide healthcare coverage to their employees. There are two different types of penalties for not providing healthcare coverage: a penalty for not providing healthcare coverage, and if you do provide coverage, there’s different penalty for not providing affordable healthcare coverage. For large employers 50 or more FTE employees, the penalty for not providing any healthcare is $2,000 per year for each full-time employee as classified by law (see below). The good news is that the IRS will give you a free pass on the first 30 full-time employees who don’t have affordable coverage. But the bad news is this penalty will increase each year according to the growth in insurance premiums.
3. Determine if your health coverage is affordable.
You’ll have to pay penalties if your coverage is not deemed “affordable.” So what’s not affordable? (1) Any employee contribution that exceeds 9.5 percent of his or her their income for their employer’s coverage; and (2)
healthcare coverage that does not pay for at least 60 percent of covered healthcare expenses, it is not considered affordable coverage. Both stipulations apply, so even if the employee’s share of the premium is less than 9.5 percent of the employee’s income, but the coverage falls short of the 60 percent minimum, you’re still penalized. Companies will be required to pay $3,000 per employee without affordable coverage. (Note: there are a number of caveats that might affect the actual penalty paid, so consult your tax advisor.)
4. Determine how many of your workers are considered to be full time by law, and therefore need to be covered by your plan.
The law defines a full-time employee as any employee who is employed (1) on average during a month 30 hours of service or more each week, or (2) 130 hours of service per month. These employees must have access to employer-sponsored healthcare benefits if your company has 50 or more full-time-equivalent employees.
5. Understand that full time equivalent and a full-time employee is not the same thing.
Be careful: you can’t use the formula above to determine if your company is considered a small (fewer than 50 FTE employees) or large (50 or more FTE employees) employer. That’s a different formula. One needs to count up all hours of service of all non-full-time employees and divide that by 120 to determine how many FTE employees you have. (Are you having trouble following this? Believe me, you’re not alone. It’s important to talk to your tax advisor.)
In the coming months, the Westchester County Association will host seminars and will share information you’ll need to know as the countdown continues to October 1st.