UNDERSTANDING OBAMACARE FOR EMPLOYERS

 

Healthcare Reform ("Obamacare") Questions & Answers For Employers

Q: Do I have to offer health insurance?
A: If you have 50 or more full time or full time equivalent employees and one or more of your employees receives premium credits (government subsidies) to help purchase health insurance in the exchange, you are required to offer health insurance or pay a penalty. If no employees receive subsidies, then you are  not required to offer health insurance and pay  no penalty.

In addition, if you have 200 or more full time or full time equivalent employees, you are required to automatically enroll each employee in the company sponsored health plan.  They can then choose to opt out. 

Q: What defines a full time employee and what is a full time equivalent?
A: A full time employee is defined as anyone who works 120hrs/mo.  The number of full time equivalents is calculated by adding up all the part time hours worked by your part time employees in a month and dividing it by 120.  You cannot avoid the obligation to provide insurance by making everyone a part time employee.

EX1: You have 40 FT employees and 20 PT employees who average 80 hours per month.  FT + FTE = 40 + (20*80/120) = 40 + 13 = 53 You are required to offer health insurance or pay a penalty.

EX2: You have 20 FT employees and  40 PT employees who average 80 hours per month. FT + FTE = 20 + (40*80/120) = 20 + 27 = 47 – You are not required to offer health insurance. 

Q: How much is my penalty if I don’t offer health insurance?
A: Penalty = (# of employees – 30) * $2000.EX: A company with 60 FT and FTE employees – (60-30)*$2000= $60,000/year = $1000/employee. 

Q: If I offer a group plan, what are requirements so I don’t pay a penalty?
A: In general, minimum requirements for a ACA compliant health plan are that it limits deductibles to a maximum of $2000 for an individual and $4000 for a family and limits maximum out-of-pocket expense over and above the deductible to $6400 for an individual and $12800 for a family.  The plan must also offer all the "Essential Benefits" as defined by the ACA, such as a free physical each year and unlimited coverage. 

Q: Can I offer a group plan and still owe a penalty?
A: Yes.  If the health plan is not ACA compliant or if the premium to be paid by the employee is more than 9.5% of the employee’s household income, then the employee qualifies for help through an exchange.  The employer then pays $3000 penalty for each employee that uses the exchange. 

Q:Are there other ways to offer health insurance for my employees that may be less expensive?
A: Yes.  In many cases it may be less expensive overall for both the employer and the employee to pay the penalties (employees have no penalty starting 01/01/2019)  and then purchase short term major medical insurance or another alternative plan through a Section 125 PRA. Under a PRA, the employer can fix their health insurance costs much the same way they do with a 401K plan.  Any contribution made by the employer is in the form of pre-tax dollars. Employees can have money withheld from their check in pre-tax dollars to pay premiums.  The net result is a lowering of the taxable income for the employee and a lowering of the FICA matching requirement for the employer. In many cases, even including the penalties the employee and the employer save over 50% compared to a ACA compliant plan. 

Q: Are there any scenarios under which I could not offer health insurance and still not owe a penalty?
A: Yes.  If you have less than 50 full time and full time equivalent employees.

 

 

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