On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (commonly known as Obamacare, the Affordable Care Act, or simply ACA) into law. Many employers are anxious about the provisions of the law, specifically whether companies will have to pay health insurance coverage and for which of their employees.
Although some parts of the law have already come into force, many major provisions will go active in the near future, including the Employer Shared Responsibility. This portion of the law will have the most dramatic and direct effect on businesses.
Employer Shared Responsibility
The provision that has piqued the interest of most employers, Employer Shared Responsibility, will take effect January 1, 2014. Employers with 50 or more full-time/full-time equivalent employees (employed an average of at least 30 hours per week) who do not offer affordable health insurance coverage that provides a minimum of acceptable coverage may be required to pay an assessment. This assessment will go into effect if at least one of those employees is certified to receive a premium tax credit in an individual health insurance marketplace.
What is Considered Affordable Coverage?
Employer-covered cost is considered affordable if it costs less than 9.5% of that employee’s annual salary. If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement. A minimum-value calculator will be made available by the IRS and the Department of Health and Human Services.
This year, you should have begun reporting the aggregate annual cost of employer-provided coverage for each employee on their W-2. Although this isn’t taxed, reporting is required for most employer-sponsored health coverage, including group medical coverage. There is an exception for small businesses that file fewer than 250 W-2 forms in a calendar year.
Incentives for Businesses
It’s not all minimum requirements and extra paperwork, though. The government is trying to incentivize businesses to help themselves. Starting in 2014, the maximum reward under a health-contingent wellness program will increase from 20 percent of the cost of health coverage to 30 percent, and programs that prevent or reduce tobacco use will see their maximums go up by much as 50 percent.
Impact on Hiring
The ACA may have an impact on your hiring decisions. The additional expense of healthcare coverage places an extra emphasis on hiring quality employees with minimal terminations. The cost of implementing widespread healthcare coverage may limit the resources you have when it comes to offering competitive salary and benefits packages. Many businesses may find it is more affordable to hire contract or temporary employees than to hire full-time staff. Each company will be impacted differently, so it is essential that you work with a staffing specialist and legal team to help identify the best option for your business.
There are many facets of the Affordable Care Act that could affect your business. Talk with one of our experts to see how employee health insurance, as dictated by the Affordable Care Act, could affect you, and how you can still bring in the employees you need on a budget affected by the ACA.