Basics of “Obamacare”

Three Things Every Employer Should Know

Published in Health Care (Wednesday, June 18, 2014 4:48 pm)

The Patient Protection and Affordable Care Act (“ACA” or more colloquially, “Obamacare”) affects virtually all employers – from small family businesses to large publicly traded corporations. The ACA is complex, and there is still some uncertainty about how its implementation will affect the employer-based system of health insurance in the United States. But let’s begin with the basics. Here are three things employers should know about the ACA:

1. The size of your business determines your obligations. Under the ACA, the requirement to purchase health insurance coverage and other mandates1 apply depending on whether a business is categorized as “small,” “midsize,” or “large.” A “small” employer is defined as a business that employed fewer than 50 full-time equivalent (FTE) during the preceding calendar year. A “midsize” employer has 50-99 FTE employees; and a “large” employer more than 100 FTE employees. Here’s how to calculate the number of FTEs employed by your business:

  1. Full-time employees who work at least 30 hours per week in any month are counted as one full-time employee. This amount is added to the number of part-time employees.
  2. Part-time employees are calculated by taking the hours worked by all part-time employees in a week and dividing that amount by 30.
  3. Seasonal employees aren’t counted in the calculation for those working up to 120 days in a year.2
  4. 2. Even “small” businesses must distribute a new “notice” to employees. There are many provisions of the ACA that do not apply to businesses defined as “small” under the ACA. However, all employers, regardless of size, and regardless of whether they provide health insurance benefits, must distribute a document entitled “Notice of Coverage Options” to a) current employees3; and b) new employees within 14 days of the employees’ start date. This notice describes the health insurance benefits offered by the employer (if any), whether these benefits meet a “minimum value threshold” required by the ACA, and advises the employee of the availability of purchasing an insurance plan through the on-line “Health Insurance Marketplace.”4 Employers with health insurance plans should contact their insurer for assistance in determining whether their plan meets the “minimum value threshold,” and other items required by the form, which is available from the Employee Benefits Security Administration, U.S. Department of Labor.5 (You may also contact Ms. Baulig for a copy of this form and additional guidance on completing it.) In addition, tax credits may be available for certain small businesses (24 or fewer employees) that offer health insurance plans meeting the minimum coverage requirements of the ACA.6

    3. The ACA does not require employers (regardless of size) to provide health insurance to their employees. That’s right – even employers with tens of thousands of employees are not required by the ACA to provide health insurance benefits. What the ACA does, instead, is give employers a choice. Beginning in 2015, “large” businesses must either a) provide health insurance benefits that meet the minimum level of benefits7 required by the ACA8; or b) pay a penalty, known as a “shared responsibility payment.” With some exceptions9, a large employer that does not offer health insurance to its employees will be required to pay a “shared responsibility payment,” of $2,000 per FTE employee beginning in 2015. The option to provide coverage10 or pay a $2,000 per FTE employee penalty kicks in for “midsize” employers in 2016. Given the option to “pay or play,” many businesses may opt for the former, especially given the numerous complexities and remaining uncertainties under the law.

    There are many other provisions of the ACA that affect employers, as well as a number of legal issues still winding their way through the courts.  I’ll be covering additional topics in future articles. If you have a question, or a suggested topic, feel free to contact me at laurie@bauliglaw.com.

    — Laurie T. Baulig

    1. The official government website, www.healthcare.gov, provides an overview of the ACA, resources for businesses, and individuals, and other information that are beyond the scope of this article. Employers should become familiar with the tools and information available on this site.
    2. From “Full-time Equivalent (FTE) Employee Calculator;” www.healthcare.gov.
    3. Current employees should have already received this notice (which was initially required by March 1, 2013, then extended to October 1, 2103, because of the confusion surrounding this issue.) The U.S. Department of Labor has stated that it will be lenient in enforcing this provision; nevertheless, employers should ensure this notice has been distributed to all current employees and take immediate steps to do so if it has not.
    4. See Employee Benefits Security Administration Technical Release No 2013-02, http://www.dol.gov/ebsa/newsroom/tr13-02.html.
    5. The form is available at the following link: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf.
    6. See IRS Form 8941, “Credit for Small Employer Health Insurance Premiums,” and related instructions; available at www.irs.gov.
    7. Known as “minimum essential coverage” under the ACA.
    8. The coverage mandate is phased in for large employers. In 2015, businesses with 100 or more FTE employees must offer health insurance to at least 70% of these employees; it rises to 100% in 2016.
    9. The total number of FTEs for purposes of calculating the employer’s shared responsibility payment may be reduced, for example, if one or more FTEs qualify for a “premium tax credit” because their taxable income falls between 100-400% of the federal poverty level.
    10. Coverage must be provided to at least 95% of FTE employees.

    Disclaimer

    The information contained in this website is provided solely for informational purposes. It should not be construed as legal advice, is not a substitute for legal counsel, and is not intended to create an attorney-client relationship. For legal advice or answers to specific questions, please contact Ms. Baulig.

Baulig Law focuses on employment issues

Problems with your employees? Problems with your employer? Frustrated with government regulations? Baulig Law provides experienced, cost-effective legal services for businesses and individuals in the areas of employment discrimination, wages and overtime, workplace safety and health, and health care compliance.

Laurie T. Baulig
Laurie T. Baulig

Attorney at Law

With a career spanning three decades, Laurie Baulig has been a litigator for the federal government, a private practitioner, in-house counsel for two business trade associations, and a teacher at a liberal arts college.  She founded Baulig Law with the idea that, at its best, law is a service profession that should be transparent, accessible and affordable.  The firm’s focus on employment law also reflects her philosophy that both businesses and their employees benefit when the workplace is free from discrimination, unfair wage practices, and unsafe or unhealthy conditions.

Laurie began her career as an antitrust litigator for the Federal Trade Commission in Washington, D.C.  She later shifted her focus to employment law as in-house counsel for the American Trucking Associations, one of the largest business trade groups in the nation’s capital.   While at ATA, she travelled across the country explaining the requirements of new laws passed by Congress – such as the Americans with Disabilities Act, Civil Rights Act of 1991, and Family and Medical Leave Act – and regulatory proposals that would have an impact on the trucking industry.   This experience not only confirmed her passion for employment law, but also awakened her interest in teaching.   So she left D.C. for Lancaster, PA in 2008 to serve as adjunct assistant professor at Franklin & Marshall College.  From 2008-13, she taught Human Resources Management, Gender and the Law, and other courses affecting legal rights and responsibilities in the workplace.

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