What does the ACA Mean to Me and My Business?
Understanding How it Applies to Your Business
Although you might be a small company, you are rapidly growing. You have a handful of employees and you’ve found your stride, however, you quickly realize that to keep your hardworking and loyal employees, you need to provide health benefits. This isn’t a surprise; you knew this was coming. What you didn’t anticipate was the cost associated with providing decent health insurance for yourself and your employees.
As you start to see the rising cost and what this will mean for your business, you start to question. What am I required to pay? What am I supposed to offer? How can I give my employees the great benefits they deserve without bankrupting my company?
First off, do you understand how the Affordable Care Act impacts your small business?
To put it plain and simple, if you have over 50 full time employees or full time equivalent employees (FTEs), you are required by law to provide them with Health Insurance or pay a fine. This is known in the Affordable Care Act as the “play or pay” mandate. The penalty is known as the employer shared responsibility payment. However, the mandate is not absolutely clear on who must pay and who does not.
Defining a Full Time Employee
How do you find out how many full time employees you technically have?
- The Affordable Care Act defines a full time employee as someone who works at least 30 hours a week and a full time equivalent as the combined hours of part time employees that equals 120 hours a month. Let’s take a look at an example of calculating full time equivalent employees:
- Your company has 15 full time employees and 20 part time employees and you want to know how many full time employees/equivalents you have. Each of your part time employee work a total of 20 hours a week, so their total combined hours for the month would be 1600 hrs. You would then divide 1600 by 120, which would be 13.33, which you would round down to the nearest whole number and then add that number to the number of full-time employees.
- With this conclusion, your company would be considered to have 28 full-time employees. In this scenario you would not be required to offer health insurance benefits and would not pay a fine. There are several different forms and widgets available that the consumer can use to calculate to get an accurate FTE number and determine whether or not they are facing a penalty. (The above link will calculate it for you.)
So technically, what is Affordable Care and how much do I have to offer?
- By law, you are required to pay enough of your employee’s health insurance premium for the employee so that 60% of the minimum essential healthcare benefits are covered. This is designated by an “Actuarial Value”, which is the percentage of the costs associated with the benefits the plan would cover.
- The Affordable Care Act (ACA) commonly refers to these as the METAL PLANS or tiers—Platinum, Gold, Silver, and/or Bronze. In order for the health plan to be ACA qualified the individual employee cannot have a maximum out of pocket of more than $6,600 for and $13,200 for a family.
- On top of everything already mentioned, to deem the coverage as affordable, the employee contribution cannot be above 9.5% of their take home pay. While you do have the freedom to choose what plan you’d like to offer your employees as a group, it is very important that you offer at least the benefits mentioned above to stay in accordance with the Affordable Care Act.
What if I’m not classified as a Large Employer?
As a small business owner myself, I want to offer as robust an insurance benefit package as I can without bankrupting my company, so that I can recruit and retain top talent and have great employees. There are several options available to employers in my situation. Many states have setup an insurance exchange available for small employers (SHOP)—The Small Business Health Options Program, in which as an employer you can contribute towards your employee’s health insurance premium and receive some of the tax savings that are available.
However, with SHOP Coverage, there are no federal subsidies that are available to individuals and their families to help offset the higher costs, so that is also something to consider. The subsidies are based on the size of your household and your modified adjusted gross income (MAGI). The savings through the subsidies can be pretty substantial for individuals and families who make between $30,000 and $90,000 per year, so it’s something I recommend taking a look at.
Determining Your Situation
There are so many changes that can have an effect on any business. What’s the best option for my company? What’s the best option(s) for my employees? In a recent training with Avenue H, the Utah SHOP administrator, they mentioned that they encourage employers to consult with their insurance broker to see what options are available that fit their needs and to find out how the Affordable Care Act affects their business.
Article Written By:
Zachary D. Lovingier
President & CEO
Optimized Health Plans