Company Size and Who is Affected?
Let's take a look at who will be affected by the law. The PPACA (Patient Protection & Affordable Care Act) mandates will apply to companies with 50 or more full time employees.
How exactly is the company size determined? The employer must employ 50 or more full time employees for 120 or more days in the preceding calendar year. So your number of employees in 2013 will determine whether the law applies in 2014.
An employee is considered full time if they work an average of 30 or more hours per week. The law also takes into account part time employees as they are counted as full time equivalents. Part time employees are used to help determine who must comply with the law but are not used in the calculation of the penalties.
Who and what must be covered?
In 2014 an employer must offer minimum essential coverage to all of it's full time employees and their dependents. Failure to comply will subject the employer to a $2,000 per year penalty per employee over 30 employees. This can also result if any full time employee receives subsidized coverage through an Exchange.
What will be considered minimum essential coverage?
The Federal Government's office website, healthcare.gov , defines Minimum Essential Coverage as follows:
"The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage."
As you can see the law is not clear as to the level of coverage required, your current plan may exceed or fall short of the law's required level of benefits.
Will offering a plan make my company compliant with the PPACA?
First, your plan must meet the, to be determined, essential level of coverage. Second, your plan must be considered "affordable" and offer "minimum value".
Employees who are eligible for coverage through work are able to receive subsidized coverage through the Exchanges created by the PPACA. An employee may qualify for a subsidy if their income falls below 400% of the Federal Poverty Level, $88,200 per year for a family of four or $43,320 per year for an individual. The employer must pay 60% of the allowed costs of the coverage and the employees contribution may not exceed 9.5% of their household income. This number will be virtually impossible for employers to determine since spouses income will be unknown.
The penalty for non-compliance is $3,000 per employee over the first 30. The penalty cannot be greater than $2,000 per employee for failure to provide coverage. After 2014 the penalty can be indexed.
Many questions remain unanswered at this time leaving business owners helpless to prepare for the upcoming changes. Be sure to check back often as I will be keeping a close eye on the developing regulations from the Department of Health and Human Services and will help explain the pending clarifications as they are released.
Joe Giangola is a Certified Employee Benefits Specialist (CEBS) for Giangola Insurance Agency. You can contact him at email@example.com or by phone at 440-964-8211 for a consultation.