Affordable Care Act: What Employers Need To Know
Of course, Individuals and Families aren’t the only ones that are affected by the Patient Protection and Affordable Care Act, here’s a basic rundown of what employers need to know regarding the ACA, for more concise information be sure to visit the healthcare.gov website:
Under the health care law, many employers must notify their employees about the Health Insurance Marketplace by October 1, 2013. Model notices are available.
Information that must be included in the written notice to your employees
If your company is covered by the Fair Labor Standards Act, you must provide a written notice to employees informing them:
- About the Health Insurance Marketplace
- That, depending on any coverage you offer, they may be able to get lower costs on private insurance in the Marketplace based on their income
- That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits
You must provide these notices to all employees by October 1, 2013. This is true regardless of their full-time or part-time status or whether they’re enrolled in your health care plan (if you have one). You must do the same for all new hires starting October 1, 2013.
There is no daily fine for failing to meet this requirement.
Get more details and guidance on employee notices in the U.S. Department of Labor’s Technical Release 2013-02.
Model notices for your use
The Department of Labor has two model notices that can help you meet the content requirements of the notice:
- Model notice if you currently offer health insurance (PDF – 207KB)
- Model notice if you currently don’t offer health insurance (PDF – 217KB)
The model notices are also available in Spanish and MS Word format.
You may use one of these models or a modified version, provided the notice meets the content requirements in Technical Release 2013-02 described above.
Small businesses may get health coverage in the Small Business Health Options Program (SHOP) Marketplace. No employers are required to offer health coverage.
Starting in 2014, businesses with 50 or fewer full-time equivalent (FTE) employees can use SHOP to offer coverage to their employees. This applies to non-profit organizations as well. You control the coverage you offer and how much you pay toward premium costs.
Health coverage through SHOP starts as soon as January 1, 2014. You can sign up and begin offering coverage any time during the year.
You have health coverage rights
Starting in 2014, insurance plans:
- Can’t turn you down based on the health status of your employees or their dependents, even if they have pre-existing conditions.
- Can’t charge you higher premiums for women, or increase your group’s premium for employees with high medical costs.
These rights do not apply to grandfathered plans.
Contact your State Department of Insurance to learn more about your rights.
You may qualify for tax credits if you offer coverage through SHOP
If you have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less, you may qualify for a small business health care tax credit.
- Starting in 2014, the tax credit is worth up to 50% of your contribution toward employee premium costs (up to 35% for tax-exempt employers). This will make the cost of providing health coverage lower.
- Beginning in 2014, the small business health care tax credit is available only if you get coverage through SHOP.
If your business has 50 or more employees, you are considered a “large business” under the health care law. Several important parts of the law apply to you.
Most large employers can’t use the SHOP Marketplace
If you have more than 50 full-time equivalent (FTE) employees, you generally won’t be able to use the SHOP Marketplace to offer health insurance to them.
Starting in 2016, all SHOPs will be open to employers with up to 100 FTEs.
The Employer Shared Responsibility Payment for 2015
The Employer Shared Responsibility Payment is a new requirement under the health care law that will apply to some larger employers in 2015. You may have to make this payment if you have 50 or more full-time equivalent employees and:
- At least 1 of your full-time employees gets lower costs on their monthly premiums through the Marketplace.
More about large businesses and the health care law
Several other parts of the law apply to businesses with 50 or more employees. Visit the Small Business Administration’s website to learn more.
The Employer Shared Responsibility Payment applies to some large employers who don’t offer insurance that meets certain minimum standards. The payment is scheduled to begin in 2015.
If you have 50 or more full-time equivalent (FTE) employees, you may have to make this payment if:
- at least 1 of your employees qualifies to save money on monthly premiums in the Marketplace.
How to know if your coverage is affordable
If an employee’s share of the premium costs for employee-only coverage is more than 9.5% of their yearly household income, the coverage is not considered affordable.
Since you typically won’t know your employee’s household income, you can generally avoid a Shared Responsibility Payment for an employee if the employee’s share of the premium for employee-only coverage doesn’t exceed 9.5% of their wages for that year as reported on the employee’s W-2 form.
For additional information about this and other safe harbors see IRS.gov/aca
How to know if your coverage provides minimum value
A health plan meets minimum value if the plan’s share of the total costs of covered services is at least 60%.
All plans in the Marketplace meet minimum value, so any coverage offered through SHOP should qualify.
To determine whether other coverage meets minimum value, you can use the minimum value calculator provided by the U.S. Department of Health and Human Services. When you input certain information about the plan into the calculator, like deductibles and copayments, it will help you determine if the plan covers at least 60% of the total allowed costs of benefits provided under the plan.
Amount of the Employer Shared Responsibility Payment
The amount of the annual Employer Shared Responsibility Payment is based partly on whether you offer insurance.
- If you don’t offer insurance, the annual payment is $2000 per full-time employee (excluding the first 30 employees)
- If you do offer insurance, but the insurance doesn’t meet the minimum requirements, the annual payment is $3000 per full-time employee who qualifies for premium savings in the Marketplace
Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.
The Internal Revenue Service has more information about the Employer Shared Responsibility Payment.