New Healthcare Law - What it Means for Employers

(From FRSA Roof Flash) After months of debates, the country now has a new law mandating wide-spread healthcare reform. The law is widely controversial, but there is no doubt that the Patient Protection and Affordable Care Act (PPACA) means big changes for healthcare providers, insurers, drug manufacturers, the uninsured, employees, small businesses and large employers; in other words, everyone.

The healthcare bill requires nearly all Americans to obtain health insurance. The law expects that most workers will get that coverage through their employers and has created a system of subsidies and penalties to make this possible. If you're an employer, the size of your workforce is significant, as the law has different requirements depending on the number of employees that your business employs.

 Small Business and Insurance Exchanges:

▪ Small business is not specifically defined, but there are a number of sections that apply only to "entities with fewer than 25 employees". There are also some sections of the law where the "effective company size is 50 to 100 employees".

▪ Beginning in 2014, health insurance will be available to individuals and small businesses through state-run "exchanges".

▪ The objective of these exchanges is to make it easier for individuals and small businesses to obtain health insurance at lower prices.

▪ The exchange program for small businesses is known as the Small Business Health Options Program (SHOP). SHOP will allow small businesses to pool together to increase their purchasing power and offer health insurance to employees at rates similar to large corporations.

▪ SHOP is available to small businesses with up to 100 employees, although states have the option to limit participation to businesses with 50 employees or less until 2016.

▪ Beginning in 2017, states may opt to allow businesses with more than 100 employees to participate in SHOP.

▪ The exchange program is also important because larger employers may be penalized if some of their employees opt to obtain insurance through an exchange and not through the company's insurance plan.

 Are employers required to provide health insurance to their employees?

▪ Businesses with fewer than 50 employees are exempt from having to provide health insurance. However, such smaller employers may opt to offer health insurance at a reasonable cost by participating in a SHOP exchange.

▪ Larger businesses are subject to a number of requirements and potential penalties, depending on the number of employees they have and the type of coverage they provide.

▪ Automatic enrollment: Employers with more than 200 employees are required to enroll new employees in their healthcare plan, subject to any waiting period. Employers must provide notice of employees' right to opt out of automatic enrollment.

▪ Notice of coverage options: Employers must give employees notice about the availability of an insurance exchange.

▪ Penalty for not providing insurance: Employers with over 50 employees that do not provide insurance must pay a penalty of $2,000 for every employee in the company even if one employee opts to obtain insurance through an exchange. However, the first 30 employees are not counted in calculation of the penalty. (Example: an employer with 75 employees would pay the penalty for 45 workers, or $90,000 {45 x $2,000}.)

▪ Penalty for providing insurance that is "too expensive": Employers with more than 50 employees that do provide insurance must pay a penalty if any of their employees obtain a subsidy to help pay for insurance. The penalty equals $3,000 per worker who uses the subsidy or $750 for every employee at the company, whichever is less.

Is there any aid available for small businesses to help provide insurance to employees?

▪ From 2010 through 2013, businesses with fewer than 25 employees and average annual wages of $40,000 or less may be eligible for a tax credit of up to 35% if they pay for at least 50% of their employees' health insurance costs.

▪ Beginning in 2014, small businesses that purchase health insurance for their employees through SHOP can receive a two-year small business tax credit of up to 50% of the cost of the premiums.

▪ Businesses with 10 or fewer employees and average annual wages of $20,000 or less are eligible for the full 35% credit between 2010 and 2013 and then a 50% tax credit beginning in 2014.