Affordable Care Act’s Employer-Shared Responsibility: Its Implications for Small Business Owners

The Affordable Care Act encourages employers to provide health insurance to their employees. This encouragement comes in the form of mandated payments to the government when affordable insurance at a certain minimum level of coverage is not provided. This feature of the ACA is known as “Employer Shared Responsibility” or the “Employer Mandate.”

Employers with fewer than 50 employees are exempt from the shared responsibility requirement. Those with 50 or more, however, referred to in the law as Applicable Large Employers (ALE), are subject to the mandated payments. There are three requirements an ALE must meet to avoid a penalty under the shared responsibility provisions.

First, an ALE must offer health insurance to at least 95 percent of its workers and their dependent children. If it does not, it may be required to pay a penalty of $180 times the number of employees for each month that insurance is not offered. The penalty is assessed if at least one employee received a premium tax credit when purchasing insurance in the federal or a state Marketplace.

Simply offering insurance, however, does not get an ALE off the shared responsibility hook. The second requirement is that the offered insurance must provide a “minimum value.” If it does not, the employer is once again liable for a penalty if at least one employee receives a premium tax credit. To meet the minimum value standard, the health plan must pay for at least 60 percent of the total cost of medical services for a standard population and must include coverage for inpatient hospital and physician services.

The third requirement relates to the relative cost of insurance to employees; this is the “affordable” mandate. The cost of the lowest-priced plan (with minimum value) must not exceed 9.66 percent of an employee’s household income. Once again, if an employee seeks insurance through the federal or a state Marketplace because the employer plan exceeds the 9.66 percent threshold, and receives a tax credit, the employer is subject to a penalty.

The penalty in the second and third circumstances is $270 for each full-time employee who receives a tax credit, but it may not exceed $180 times the total number of full-time employees.

If an employee enrolls in a Marketplace plan and receives the tax credit, the employer will receive a notice from the Marketplace indicating this information and that the employee had stated one of the following:

  • The employer did not offer insurance;
  • The employer offered insurance that was not affordable or did not provide minimum coverage; or
  • The employee was in a waiting period before being allowed to enroll in the plan.

An employer may appeal a decision that it failed to meet the ACA’s affordability and minimum value provisions. If, for example, an employee buys insurance in the Marketplace while erroneously asserting that her employer does not offer insurance or that it does not meet the affordability or minimum value requirements, the employer will not be held liable for a shared payment.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®. We offer a complete spectrum of legal services for businesses and can help you determine your company’s responsibilities under the Affordable Care Act. We also offer a LIFT Start-Up Session,™ which includes employment structuring, financial, and tax systems you need for your business. Call us today to schedule a time to have a conversation!

 

 

 

 

Ways to Manage Increasing Healthcare Costs for Small Businesses

The good news about healthcare costs in the United States is that they have decreased from 6-7% per year to just around 4%. The bad news is that health care costs continue to rise faster than workers’ incomes. For small businesses, this is a recipe for disaster. They are caught between increased costs for employer-sponsored health insurance and the need to offer better wages to attract and retain employees.

More than half of small businesses (those with 200 or less employees) offer health insurance. That number has declined since implementation of the Affordable Care Act, but it appears to have recently leveled off.

Small businesses are hit particularly hard by increased healthcare costs because they tend to be engaged in lower-wage enterprises like food and clothing retail. The average policy cost to an employer for a family of four is around $12,000 per year. For a job that pays minimum wage, this is a significant addition to the total cost of the employee.

Employers, both large and small, have been coping with rising costs by shifting them, in part,  to employees through increased premiums, co-pays, deductibles, and uncovered services. Over time, however, this approach exacerbates the overall problem for employers because it amounts to a pay cut.

A more effective approach that some businesses have used is insurance plans in which services are limited to narrow networks of providers with whom prices are pre-negotiated. This provides for lower premiums paid by both the employer and employees. The downside, of course, is the restriction on provider options, but this is proving to be the lesser evil when compared with nearly unaffordable costs.

Another approach for small businesses is to stop offering insurance to their employees and instead shift the insurance costs into higher wages. This idea works because of the ACA’s insurance marketplace. Employees may be able to go to the marketplace and purchase insurance tailored to their particular circumstances and still have some of the extra money left over. In addition, lower paid employees may qualify for federal subsidies that reduce premium costs. In the end, the small businesses reduce their employee costs by taking advantage of federal health care subsidies.

As holistic lawyers for your business focused on the overall success of your endeavors, we can support you to evaluate the best way to provide health care benefits to yourself, your family and your team members during a LIFT Start-Up Session or comprehensive LIFT Business Audit. Contact us, when you are ready for more creative support to grow your business.

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer® One of our primary services is a LIFT Start-Up Session,™ in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate.  Call us today to schedule a time to get started!

 

 

 

 

Congress Takes Steps to Avoid Negative Effects of Affordable Care Act on Small Businesses

One facet of the Affordable Care Act is specific benefit requirements that have to be offered by small businesses (those with 50 or fewer employees). These requirements were scheduled to begin applying to employers with up to 100 employees on January 1, 2016. Business leaders were concerned, however, this change would result in substantially increased health insurance costs for the businesses forced to meet the requirements.

Congress passed a bill in October that gives states the right to determine if businesses with 51 to 100 employees should be considered a small business for the purposes of the Act. It is widely anticipated that states will keep the small business designation capped at 50 employees or less.

This episode marks the 14th time Congress and President Obama have agreed on legislation to fix bugs in the Affordable Care Act. Among the most notable fixes was a bill passed in 2011 repealing a provision that required businesses to report to the IRS any purchase of more than $600 to an individual vendor. Another big fix was a 2013 change repealing an optional long-term insurance plan that proved impractical.

One of the side benefits of this most recent revision is that it will result in more disposable income for employees. That is good news for both the wage earner and the government. With more disposable income comes more reportable income. Therefore, the IRS will collect an estimated $280 million in additional income tax revenue.

Another change still being contemplated by Congress is a repeal of the 2.3% tax on medical devices. In addition, the Act’s so-called “Cadillac Tax” is being targeted for repeal. That provision imposes a special tax on high-priced employer-offered health care plans.

In other words, the Affordable Care Act doesn’t appear to be anywhere close to its final form. Stay tuned…

This article is a service of Gratia P. Schoemakers, Creative Business Lawyer®.  We are well-versed in the federal and state laws that apply to businesses, including the Affordable Care Act. Make an appointment today to discuss any questions you have about the ACA’s requirements or schedule a LIFT Start-Up Session™ or LIFT Audit™ if your company is established, both of which include employment structuring, financial, and tax systems you need for your business.

Can Your Company Actively Avoid The Affordable Care Act?

If you have more than 100 employees, Affordable Care Act requires you to provide health insurance coverage to your full-time workers. On January 1, 2016, the threshold drops to 50 employees or more. The Act defines full-time employees as those working an average of at least 30 hours per week.

Can You Avoid the Requirement By Just Having Part-Time Workers?

Many restaurants, wishing to avoid the ACA requirement of providing health-coverage, have lowered the hours of employees across the board to bring them under the 30-hour limit.

The Dave and Buster’s restaurant chain has been sued in a class action by employees whose hours were reduced to avoid providing health care coverage. The thrust of the complaint is that the reduction violates the Employment Income Security Act (ERISA), which governs employer-provided health insurance as well as retirement plans. ERISA makes it unlawful for an employer to interfere with any right that a plan participant is entitled to under the Act. The suit alleges that the reduction in hours constitutes interference.

Until the Court’s Rule …

If your company has more than 100 employees or  meets the upcoming 50-employee ACA requirement, you will want to carefully assess your staffing plan with the assistance of experienced counsel. We can consider the solution that aligns with the law and meets your company objectives. If you are not an existing client, contact us for a LIFT Foundation Audit where we will review all of your legal, insurance, financial and tax systems and find places you can save money and shore up the foundation to earn more. If you are an existing client, and have more than 50 employees, call to schedule a ACA review and audit today under your membership plan.

Supreme Court’s Affordable Care Act Decision and Small Businesses

The United States Supreme Court’s recent decision in King v. Burwell clears up a final lingering question surrounding the Affordable Care Act. Issued June 25, 2015, the decision upheld the tax credits that are intended to make health insurance affordable for millions of Americans. The credits are available to those whose employers do not provide insurance and who do not qualify for a government program such as Social Security. People in that situation are expected to purchase insurance through a state or federal insurance exchange.

The Significance of the Case

The Court’s decision ends speculation as to whether the tax credits would be available for people in all states. The Act’s framework called for states to establish insurance exchanges through which people could buy insurance. This option is necessary because the Act also imposes a tax consequence for those who do not ultimately have health insurance coverage.

Language in the law stated that the credits were for people who bought through a state exchange. It also required the establishment of a federal exchange for citizens of states that do not set up their own. In the case, King argued that if a state did not establish an exchange, no credits were available. The Court found that the credits applied to those who obtained insurance through either a state or federal exchange.

The Significance for Businesses

The Act exempts businesses with fewer than 50 employees from the requirement to provide health insurance. Employers of 50 or more workers are required to provide insurance or pay a penalty to the government. In addition, if any employee of a large employer could not afford the insurance offered and found it necessary to buy insurance through an exchange, the employer would have to pay the penalty. The uncertainty of the tax credit had businesses hedging their bets on how to structure their insurance plans and, for small employers, whether to offer insurance at all.

If the credits had not been available in the 34 states with no state exchange, then small employers may have felt a stronger urge to offer insurance to employees. If they would have offered a plan, it would have been required to meet the federal coverage standards and would have imposed substantial reporting requirements. Larger employers, while still required to offer a plan, would not have had to worry about the penalties if any of their employees opted to buy less expensive insurance through the federal exchange.

The King ruling was effectively the last challenge to the continued viability of the Affordable Care Act. The lack of tax credits in 34 states would have undercut the entire scheme of the law. Employers who were delaying decisions on their insurance benefit plans until the Court ruled now know what to do.

Creative Business Lawyers are trained to unravel complex legal regulations that affect your business. The Affordable Care Act is just one example of a significant new requirement that complicates the operation of a business. We can help you evaluate the landscape and decide how you should proceed with complicated regulatory requirements. Make an appointment today to discuss any questions you have, or schedule a LIFT Start-Up Session, which includes employment structuring, financial, and tax systems you need for your business.

Government Announces One-Year Delay in Small Business Sign-Up Using HealthCare.gov

On Nov. 27, the federal government announced a one-year delay for small businesses to sign up for insurance plans using HealthCare.gov.  The enrollment deadline is now November 2014 for coverage that will take effect in January 2015.

The government said the delay was necessary to allow individuals impacted by the well-known technical difficulties with the HealthCare.gov website to enroll first, before offering online enrollment to small businesses, which can still apply for insurance plans through agents or brokers.

Under the Affordable Care Act of 2010, businesses with 50 or fewer full-time equivalent employees would use the Small Business Health Options Program (SHOP) to offer insurance coverage for employees.  Companies with fewer than 25 full-time equivalent employees making an average of $50,000 or less may qualify for a small business health care tax credit worth up to 50% of an employer’s contribution to employee premium costs if they obtain coverage through SHOP.

Employers are still able to review plan options at HealthCare.gov, but will not be required to purchase plans until next November.  At that time, employers will be able to offer their employees several different plan options and enroll online.

In the meantime, the government is encouraging small business employers to use insurance brokers or agents to enroll using the SHOP marketplace, and will make tax credits available for qualifying small businesses through agents and brokers.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.

 

What the Delay in Obamacare Means for Small Business

The Obama administration unexpectedly announced in late June that it was delaying the implementation of new health law penalties for at least a year, leading many small business owners to wonder what the reprieve will mean for their companies.

Firms with more than 50 full-time employees would have been penalized $2,000 per uninsured employee starting in January 2014.  That deadline has now been put off for another year, delaying the implementation deadline for the Obamacare provisions until January 2015.

This delay means small businesses may rethink their strategies for complying with the new health law.  Some takeaways from the delay:

More time to assess options.  A recent Wall Street Journal survey of small business owners found that about half didn’t know the cost of providing insurance for all employees, and if it would be more or less costly to provide the insurance or pay the penalties.  The extra 12 months provides employers with more time to assess their options.

Better compete for talent.  Research shows that companies offering health care benefits tend to attract more qualified talent.  By implementing coverage before your competitors do, you may be able to recruit better employees.

Renew spending plans.  With a year’s delay in implementation of health care law provisions, the cash you may have already set aside to pay for a 2014 implementation could be freed up to cover other operating costs.

If you need more guidance on new health care laws for small business, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.

 

 

Obamacare Small Business Health Options Program (SHOP) Hits Logistical Speed Bump

A logistical speed bump is going to delay the number of insurance plan options for small businesses under Obamacare for at least a year, according to a Wall Street Journal report.

The U.S. Department of Health and Human Services (HHS) is now proposing that small businesses have only one insurance plan option to offer employees starting in 2014 instead of the multiple options that were part of the original plan – a plan designed to reduce costs because multiple options would have created competition among insurers and attracted more participants, leading to lower premiums.

Apparently the government underestimated the time – and technology — it would take to implement the 33 state exchanges and is now proposing 2014 as a transitional year before a full range of plans is offered to the marketplace, saying the government and insurers need “additional time to prepare for an employee choice model.”

HHS noted that the 17 states running their own exchanges could choose to delay the implementation of a full menu of insurance plans into 2015 as well.  A few state exchanges, including California and Connecticut, said they would offer employee choice options beginning next year.

Under the Affordable Care Act of 2010, businesses with 100 or fewer employees will be able to offer employee insurance coverage via the exchanges.  States can limit participation to companies with 50 or fewer employees in 2014 and 2015.  Businesses with fewer than 25 employees are eligible for tax credits for up to 24 months of coverage purchased via an exchange.  Companies with more than 100 employees will be eligible to participate in exchanges beginning in 2017.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

 

 

 

Top 3 Things Small Business Owners Need to Know About the Affordable Care Act

The Small Business Administration (SBA) has launched a new blog series to educate small business owners about what they need to now about the Affordable Care Act before it goes into full effect in January of 2014.  The new series tackles common misperceptions about the ACA; one post details the top three things small business owners need to know about the ACA:

  1. Tax Credits for Businesses with Less Than 25 Employees. Businesses that have fewer than 25 employees will not be required to provide health insurance under the Affordable Care Act, but those businesses are offered tax credits of up to 35% if they do provide health insurance for employees.  Qualifications to get the tax credit include:
  • Business employs fewer than 25 full-time employees
  • Average annual wage is less than $50,000
  • Business contributes 50% or more toward health insurance premiums for employees

This tax credit will rise to 50% in 2014 and will be available to small businesses that participate in the Small Business Health Options Program (SHOP) Exchanges.

  1. Affordable Insurance Marketplaces for Businesses with Less Than 50 Employees. Beginning in 2014, small businesses with fewer than 50 employees will not be required to provide health insurance, but will have access to the Small Business Health Options Program (SHOP) Exchanges, a competitive health insurance marketplace for small employers to find affordable coverage for employees.  Open enrollment begins Oct. 1, 2013.
  2. Employer Shared Responsibility Provisions for Businesses with 50+ Employees. Starting in 2014, businesses with 50 or more full-time employees that do not offer health insurance to their employees may be subject to what is called an “employer shared responsibility payment” if at least one full-time employee (someone who works an average of 30+ hours per week) receives a premium tax credit to purchase coverage in an insurance Marketplace.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.