Blog 06 04 13 – Health Care Insurance and Large Employers
The Patient Protection and Affordable Care Act, which was amended by the Health Care and Education Reconciliation Act of 2010, does not mandate an employer to offer employees acceptable health insurance, but does require that certain employers with at least 50 Full-Time Equivalent Employees pay a penalty starting in 2014. This is if one or more of their Full-Time Employees obtain a premium credit through a health insurance exchange. Employees can be eligible for a premium credit if the employer does not offer coverage to their employees or the employer offers coverage that is not “affordable” or provide “minimum value”.
This mandate is only applicable to Large Employers. A large employer is defined as an employer with more than 50 full-time equivalent employees during the preceding calendar year. To calculate the equivalents, both full and part-time employees are considered. Full-Time employees are those working 30 or more hours per week, but exclude full-time seasonal employees who work less than 120 days.
In the calculation of the penalty, only Full-Time employees are used, part-time and seasonal workers are not included for penalty calculations. They are only included to determine if the employer is a Large Employer.
Premium Credits for Individuals
In 2014 individuals who are not offered employer-sponsored health insurance coverage, are not eligible for Medicaid or other programs, may be eligible for coverage through an exchange. These individuals will have income between 138% and 400% of the federal poverty level. Those offered health insurance from their employers can only receive the premium credits for exchange coverage if they are not enrolled in their employer’s coverage, or the employer offers coverage that is not “affordable” or provide “minimum value”. In determining if the coverage is “affordable” or does not provide “minimum value”, the individuals require contribution to the plan premium for self-only coverage exceeds 9.5% of their household income, or the plan pays for less than 60% on average of covered health care expenses.
In 2014, the monthly penalty to be assessed to a Large Employer for each full-time employee who receives the premium credit will be one-twelfth of $3,000 for any applicable month. The total penalty is limited by an extensive calculation. After 2014 the penalty amounts will be indexed by the premium adjustment percentage for the calendar year.
Additionally, firms with over 200 full-time employees that offer insurance must automatically enroll new employees in the plan. Employees must be given adequate notice, or an option to opt out.
Planning steps to take before the end of 2012, or early in 2013:
If you have “around” 50 employees, discuss the costs associated with the employer mandate with your accountant.
Should the business consider downsizing so that the business has less than 50 FTEs starting in 2014.
Is there a competitive advantage to providing health insurance to employees, if not and there are less than 50 FTEs, consider terminating insurance coverage.
Compare the cost of insurance with the cost of the penalty for not buying insurance – most businesses are financially better off paying a penalty, even with the loss of a tax deduction for health insurance expense.
The final decision does not need to be made until January of 2014, but discussing now can help plan for the implementation.
For more information visit our website at www.dncpas.com or give one of our accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.