The Affordable Care Act places new demands on employers of all sizes. Beginning in 2014, employers must comply with the Employer Shared Responsibility requirements of the ACA. Many times the new rules are not described well, so we’ve designed the tools below to help you in understand and meet the Affordable Care Act for your business.
Beginning in 2014, the Affordable Care Act requires many employers offer at least one health insurance option that meets specific standards or face financial penalties. This is also called the employer mandate.
Employers need to consider three important elements:
The Affordable Care Act defines a large employer as one with at least 50 full-time equivalent employees during the prior calendar year. Full-time is defined as working an average of 30 hours or more per week or 130 hours per month. Part-time employees are counted on a pro-rata basis. Seasonal employees working less than 120 days a year do not have to be counted. Companies under common ownership, such as subsidiaries, must count all employees together for this purpose.
The coverage requirement itself has several parts, and we’ll try to simplify them here. A large employer must offer (A) its full-time employees at least one (B) Affordable, (C) plan option meeting Minimum Value Plan Option.
A. Offer Coverage for full-time employees
As if it isn’t already confusing, this calculation uses employees working more than an average of 30 hours per week, not FTE’s. Employers are not requred to offer coverage to people working less than 30 hours.
B. Offer Affordable Coverage
Affordable means the employee’s share of the premium does not exceed 9.5% of income for individuals or families earning 400% or less of the federal poverty level. Since you probably don’t know an employee’s household income, the IRS issued a safe harbor rule. Under the safe harbor, employers can consider a plan affordable if the employee’s share of the single-only premium does not exceed 9.5% of W-2 wages.
An employee may still go to a health insurance exchange and be eligible for premium subsidy if his/her share of the family premium is greater than 9.5% of income. The employer is not subject to a penalty when this occurs.
C. Offer Coverage Meeting Minimum Value Requirements
The Affordable Care Act defines “Minimum Value” as paying 60% or more of a typical person’s medical costs. Plan values get precious metal labels, Bronze, Silver, Gold and Platinum. The minimum value plan is the Bronze level. The new health insurance exchanges will only offer plans meeting the requirements of these levels. Unfortunately, this means many plans will cease to exist.
The Actuarial Value Calculator from the Department of Health and Human Services will help assess your current plan level and future options.
While most people have heard about the employer penalties exist, very few know there are really two of them. The tools below will help you test whether your company may face a penalty in 2014.
We will keep you informed as new data becomes available. If you have any questions or if you would like help in designing your health plan to meet the demands of the Affordable Care Act, please contact Soter Healthcare.