Most small business owners think that because they have less than 50 full time workers they are not impacted by this law. The fact is, everyone is impacted. The requirement to provide health insurance may not fall upon you as a business owner, but everyone is required to get some type of insurance or pay a penalty. The act also gives the power to the U.S. Government to dictate the type of insurance you are required to purchase.
One more thing.......
The act is evolving. The government is still writing the regulations so no one can tell you all of the rules.....they simply have not all been written.
With that said, let's dive in to some of the details.
As an Employer, do I have to provide insurance?
In determining if your business meets the 50 full time equivalent employees to see if your business is required to offer healthcare, the calculation is based upon your employees work in the previous year. So for the year 2014, the year the requirement kicks in, you must calculate whether you qualify based upon calendar year 2013.
If you have 50 full time equivalent employees, then you must provide health insurance or face penalties (the Supreme Court called it a tax). You can have a small number of full time workers, but your part time workers could kick you over the threshold. The rules are not easy, so let me try to make them as basic as I possibly can.
The Act has two types of employees...a full-time employee and a full-time equivalent employee.
The new federal definition sets the standard of a full-time employee as working 30 or more hours during a typical week or 130 hours of service per calendar month. So to be a full time employee, an employee must work at least 30 hours of service per week or at least 130 hours each calendar month.
For example, if you were hired as a 'full time" worker in May of the year of calculation, your time would be included in the Full Time Equivalent calculation. If you worked every month of the year at least 130 hours, you would be a Full Time Employee.
For example, if you employ 35 full-time workers (working on average of more than 30 hours per week) and 20 part-timers (working on average 24 hours per week, or 96 hours per month). These 20 part time workers would be included in the full time equivalent calculation which equals 16 full time equivalent employees. (20 x 96 / 120 = 16). So for calculation purposes, this employer has 35 + 16= 51 full-time equivalent employees and must offer health insurance.
Even if you are a small business owner with 49 or fewer employees you will still need to deal with compliance issues, regardless of size ....
Small Business Compliance
Employers must provide employees written notices about online exchanges that will allow them to buy health care insurance. The notices must be sent out by Oct. 1, 2013 and:
- Inform employees about the existence of health care exchanges and give a description of the services provided;
- Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer's plan does not meet certain requirements;
- Inform employees that if they purchase coverage through the health care exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes; and,
- Include contact information for the health care exchange and an explanation of appeal rights.
Does your small business already offer health insurance?
If so, starting in 2014 all new healthcare plans must comply with the Health Care Act. New plans offered must provide "essential health benefits". Essential benefits must include a number of specific services, including maternity and newborn care, emergency services, mental health and substance abuse services, preventive care and prescription drugs.
While any new plans must comply with the requirements, businesses may grandfather their existing group health plans. However, if you have not already done so, it is probably too late to grandfather.
Businesses with over 250 employees must report on workers' W-2 forms the costs of company-sponsored health coverage for the previous year, and supply employees with a summary of benefits coverage. It is being contemplated that small businesses will have to comply soon so stay tuned.
FSA Limits and HSA Limits
As of 2013, the law limits employee annual contributions to pretax health flexible spending arrangements, or FSAs, to $2,500, a figure that will be adjusted for inflation in future years. Also HSA plans can no longer pay for over the counter drugs without a penalty. The penalty has been increased from 10% to 20%, so if you have an HSA plan, be aware.