By: Kurt Heling, CPA Managing Member of Alberts & Heling CPA’s LLC
Employers are moving into new unchartered areas with respect to their employees’ benefit and health insurance coverage. Beginning in 2015, the Patient Protection Affordable Care Act places responsibility on applicable large employers to offer group health insurance coverage to their full time employees or potentially pay a penalty if at least one full time employee obtains a subsidy for coverage through a health insurance marketplace. The provisions are commonly known as the Employer Shared Responsibility (ESR) or “pay or play” requirement.
The ESR requirements go into effect for applicable large employers with 100 or more full time employees on January 1, 2015. Employers with 50 – 99 full time employers will see enticement provisions beginning on January 1, 2016. Employers will use their employee information from 2014 to determine whether they have enough employees to be subject to these new provisions in 2015. The process for identifying potential fines for non-compliance will begin in 2015.
So what about employers with less than 50 employees? Simply put, they don’t have to do anything. In order to be competitive in the employee marketplace however, they may still want to provide the opportunity for health coverage. For an employer to drop their plan and send their employees to the health insurance exchanges would be a knee jerk reaction that could be detrimental in retaining and attracting quality employees. In addition, an employer can’t instruct employees to go to the exchanges with the promise they will reimburse the employee their out of pocket cost of insurance. This will result in $100 per day per employee fine to the employer. The employers can, however, increase the pay an employee receives and leave the employee do what they want with the additional pay (using it for health insurance or other purposes).
Small employers also have the opportunity to compare plans and pricing through the Small Business Health Options Marketplace, known as SHOP. In 2014, SHOP is open to employers with 50 or fewer full time equivalent employees (FTE). (Self-employed individuals with no employees can obtain their coverage through the individual Health Insurance Marketplace) The SHOP Marketplace offers plans through four categories: Bronze, Silver, Gold and Platinum. These plans offer similar benefits but differ on how the plans share costs. The amount an employee can expect to pay for deductibles, co-payments, and the total out-of-pocket expenses are determined on the plan chosen. Plan options vary by area. In Outagamie County for example, Arise and Common Ground are the two providers available. There are some areas, especially rural areas (e.g. western Wisconsin), that have no SHOP providers available.
Qualified small employers [generally those with less than 25 full time equivalent employees (FTE) and average annual wages of $50,000 or less per FTE) that purchase health insurance for their employees are allowed a tax credit of up to 50% (35% for tax-exempt employers) of the amount the employer contributes to the cost of employees’ health care coverage. This is an increase from 25%-35% in 2010-2013. However, beginning in 2014, an employer must purchase their plan through the SHOP Marketplace in order to qualify for the credit.
Understanding which plan is most cost-effective for employers and their employees requires consultations with insurance and tax advisors because the rules are very complicated. Both large and small employers need a working knowledge of the rules that will affect them now and in the future.
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