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Employer Mandate and How Penalties Work

ACA News: Learn more about how employer mandate and how penalties work.

What is the employer mandate?
For 2015, large companies with 50 or more employees had to offer minimum value, affordable health care coverage to their full-time employees or face a penalty. They also may have to pay a penalty if any of their employees get government aid to lower their health coverage costs. This penalty is essentially a non-deductible, extra tax.

Midsize businesses with 50-100 employees were allowed to delay this mandate until 2016, if they met certain conditions for transition relief. Beginning January 1, 2016, but by the first day of the 2016 plan year, all midsize employers with 50-100 full-time employees and equivalents (FTEs) must have a health care plan option in place that meets minimum essential coverage for 95 percent of their employees. That’s the requirement given by the Affordable Care Act (ACA). Employers who fail to prepare properly will face penalties.

What is minimum essential coverage?
The health care plan an employer offers must be considered minimum essential coverage. Stated briefly, this means that it must:

  • Supply minimum value by covering at least 60% of the total cost of benefits.
  • Be affordable. The premium for covering the employee must be less than 9.5% of the employee’s income.

How do employers calculate the number of employees?
Calculating the number of employees can be complicated. Employers should speak with their attorney or tax adviser for help. But here are the basic steps:

  1. Count the employees who worked at least 30 hours per week each month (including seasonal employees) in the prior calendar year.
  2. Count the employees considered full-time by adding the number of hours worked by all part-time employees (as well as seasonal) and dividing by 120.
  3. Add the monthly totals of steps 1 and 2 and divide by 12.

If the result is less than 50, the employer doesn’t have to offer health coverage.

What are the penalties?
There are different kinds of penalties, based on what part of the rule the employer didn’t follow. Employers have to pay a penalty for:

  • Not offering health coverage to full-time employees and their dependent children to age 26, and if any full-time employee gets government aid to lower the cost of coverage. The annual penalty is $2,000 x the number of full-time employees, minus the first 30 employees.
  • Offering health coverage for only part of the year. The penalty is based on the number of full-time employees and the number of months coverage was not offered.
  • Offering health coverage to 95% of full-time employees but one or more full-time employees gets government aid to lower the cost of their coverage because the coverage is not considered affordable. The annual penalty is $3,000 per employee getting government aid.

The U.S. Chamber of Commerce has developed this penalty calculator to help determine whether companies must offer coverage and what the penalty might be based on the number of full-time employees.

For more information about the employer mandate and penalties, see this fact sheet with frequently asked questions on ourhealth care reform website.

Read the full report here.

Contact Steven G. Cosby, MHSA, Group Health Insurance Broker and Agent with Cosby Insurance Group, with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

Cosby Insurance Group Warrenton Health Insurance Broker and Agent

Five Myths About the ACA and Midsize Businesses

ACA and Midsize Businesses: Many businesses are struggling to understand and comply with the rules of the Affordable Care Act (ACA). Here are five common myths* midsize group clients (51-100 employees) may need your help with to understand:

· Myth #1: Our business is exempt from the Affordable Care Act’s employer mandate
Companies with more than 100 full-time employees must provide health insurance to full-time workers starting this year. In 2016, your employer clients with 51-100 full-time workers also will have to provide coverage.

· Myth #2: Most businesses of our size don’t provide health insurance today
The ACA requires your midsize employer groups to change their existing coverage. But, only a small percentage will be offering coverage for the first time.

· Myth #3: Even if we are penalized for not providing coverage, we can deduct the penalty on our income taxes
Companies that fail to comply with the employer mandate are subject to a penalty. But the mandate is set up as a shared responsibility fee. This makes the penalty a tax that cannot be deducted for federal income tax purposes.

· Myth #4: We can continue to offer a limited benefit or mini-med plan
Limited benefit plans do not meet ACA rules, so any midsize group clients currently offering these types of plans will need to upgrade their coverage to meet the employer mandate.

· Myth #5: We will have to buy our insurance from a government website
The Small Business Health Options Program (SHOP) is the online Health Insurance Marketplace, or exchange, for businesses. But, let your clients know that using the exchange is optional. Employers can come to you at no extra cost and buy directly from an insurance company.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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Obamacare is Finally Hitting with Employer Mandates

Many employers now have to comply with Obamacare.

Companies with more than 100 full-time workers must offer affordable health insurance to at least 70% of their staff. This “employer mandate” was supposed to take effect in 2014, but the Obama administration delayed it to this year.

And those that don’t comply face hefty penalties.

Companies will be fined if they don’t offer coverage and even just one of their workers gets subsidized insurance on an Obamacare individual exchange. For 2015, the fine is $174 a month times the number of full-time employees (minus 80 workers).

But that penalty is higher if the company offers insurance, but it’s not considered affordable or comprehensive. In that case, the employer pays $261 a month for each employee who received subsidized coverage on an individual exchange.

Employer insurance offerings now have to pass two tests.

To be affordable, the plan’s premiums can’t cost a worker more than 9.56% of his income. This applies only to employee-only coverage since the health reform law does not consider the affordability of family coverage.

To be comprehensive, the policy must pay for at least 60% of the staff”s collective medical expenses and cover an array of essential health benefits, such as prescriptions and maternity care.
Some 94% percent of firms with 100 or more employees offered health benefits to at least some of their employees in 2014, according to the Kaiser/HRET Employer Health Benefits Survey.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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House Tweaks Employer Mandate, But Bigger Battle Looms

On the first day of the 114th Congress, the House voted unanimously to enact a minor change to the Patient Protection and Affordable Care Act’s employer mandate.

Under the proposed legislation, veterans who already have healthcare coverage would not be included in the tally of employees for purposes of determining whether a business is subject to financial penalties for failing to offer coverage.

Passage of the “Hire More Heroes Act of 2015,” sponsored by Rep. Rodney Davis (R-Ill.), was the first of two votes on the employer mandate expected this week. The other legislation—which would change the definition of full-time work for purposes of applying the mandate from 30 hours a week to 40 hours a week—promises to be more contentious.

“Only a law as bad as Obamacare would penalize a small business for hiring a veteran,” Rep. Paul Ryan (R-Wis.), the new chair of the House Ways and Means Committee, said during the floor debate on the bill that would remove veterans from businesses’ worker counts.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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Does the Employer Mandate Apply to Your Business?

Lingering questions about the Affordable Care Act’s impact on small businesses goes to one of the fundamental issues the law raises for employers: the responsibility to offer health insurance to workers or face a penalty.

The employer mandate, as it’s known, applies to companies with at least 50 employees. Originally, it was supposed to take effect at the beginning of this year.

Last year, however, the administration put off enforcing the mandate until 2015. By last spring, the mandate, staunchly opposed by most Republicans, had lost the support of some Democrats as well.
And in April, a former Obama administration spokesman predicted that the employer mandate “will be one of the first things to go.”

So the first question for employers is, Will the mandate actually take effect next year? And the answer is: Not for companies with fewer than 100 employees.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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