Employers now have until 2015 to provide health insurance for employees or pay a penalty under the requirements of the new Affordable Care Act. But business owners might do well to use the time to understand the details of the complicated, 2,000-plus-page act, officials said.
President Barack Obama's Affordable Care Act will provide health care coverage to 30 million people.
Last summer, the Supreme Court ruled that the core of the health care reform act was constitutional.
Some of the act's requirements have already been implemented, and others will continue to be rolled out through 2018.
Under the act, marketplaces are being created, which will allow individuals and small business owners to shop for insurance coverage via Internet-based exchanges.
Enrollment for the exchanges starts Oct. 1, and individual coverage will be effective in January 2014.
Bloomberg reported last month that the employer mandate delay addresses complaints from business groups that the law's reporting requirements are burdensome.
"The administration has finally recognized the obvious—employers need more time and clarification of the rules of the road before implementing the employer mandate," Randy Johnson, a senior vice president at the U.S. Chamber of Commerce, the nation’s largest business lobby, said in an email to Bloomberg.
Not every employer will be impacted by the new law. So who will and who won't?
Industry experts said that the law is applied in different ways, depending on each person's and business' situation.
"Broadly, it's hard to really say how this impacts a business or even a person," David Yoder, co-founder of American Exchange, said.
American Exchange is a new local company whose leaders are helping residents nationwide connect with health insurance through marketplaces that will be open in October.
Here's a guide to help employers sort out the details.
Under the Affordable Care Act, businesses with 50 or more full-time or full-time-equivalent employees must offer health insurance coverage to their full-time employees and their eligible dependents or face a penalty, according to Robert Half International, a staffing agency that has an office in Chattanooga.
Small businesses with less than the equivalent of 50 full-time employees won't be impacted.
And many businesses that have 50 employees already offer health insurance options, so those businesses won't be impacted, unless they don't offer the appropriate level of coverage required by the act.
According to the National Conference of State Legislatures, 98 percent of employers with more than 200 employees offer health insurance, as do 94 percent of employers with 50 to 199 employees.
Whoa. What's this "full-time-equivalent employee" business?
The act requires that employers take into account the number of hours worked by both full-time and part-time employees.
A full-time employee is someone who works an average of 30 hours a week or 130 hours per month.
To figure out the number of full-time-equivalent workers, leaders combine the number of people who work less than a full-time employee.
For example, 100 employees who work part time equals an equivalent of 50 employees.
According to the Robert Half International report, the number of full-time-equivalent employees for a given month is calculated by taking the aggregate number of hours of service—up to 120 hours per employee—for all employees with less than 30 hours of credited service per week and dividing the total numbers of service by 120.
What about contract workers?
Temporary and contract workers retained through a third-party staffing agency for legitimate business reasons are considered employees of that staffing firm, which is responsible for dealing with the act's mandates.
What's the penalty?
Businesses that don't already offer at least 95 percent of its employees insurance and that do meet the number-of-employees requirement must offer insurance or pay a penalty.
Businesses that don't offer "affordable" insurance options to employees and eligible dependents or that offer plans don't meet "minimum value" are also subject to penalties.
But the penalties vary.
The full-time equivalent is used to calculate whether a business must pay the penalty, but leaders only have to pay the penalty on the number of full-time employees.
The penalty for business owners per year is $2,000 for each full-time employee, minus 30 employees.
The penalty is $3,000 a year for each full-time employee (minus 30 employees) who gets insurance through the exchange and receives a tax credit.
Yes, it's complicated. Click here for a flow chart about penalties for employers.
What does "minimum value" mean? What does "affordable" mean?
According to the Robert Half report, "minimum value" means that the plan has a certain level of comprehensive benefits. To meet the act's maximum value requirement, the plan must pay at least 60 percent of the total benefits.
Click here for a maximum value calculator.
Under the law, coverage is "affordable" if the employee portion of the premium doesn't exceed 9.5 percent of an employee's household income, according to Robert Half.
Are some employers considering dropping insurance offerings?
Founders of American Exchange said they will work with employers who want to drop their current insurance offerings.
They will work to help employees transfer smoothly into the marketplaces.
Why might an employer drop coverage and pay a penalty?
Yoder said that employers may choose to stop offering health insurance—not necessarily for a direct money-saving correlation—because the process of administering health plans is burdensome.
And some employers may choose to chip in for some of the costs, he said.
"Many choose to do that because they already pay some portion, anyway; they just want control over those costs and don't want to pick, manage and administer health benefits any longer," he said.
In some situations, individuals may be better off going through the exchange instead of the employer, he also said. The employer gets coverage specific to their situation and may qualify for tax credits.
"Demonizing the employers that decide to make this move [and stop offering insurance]—it is unfair and it’s misinformed," Yoder said.
Starbucks CEO Howard Schultz recently said that his company "won’t use the new law as excuse to cut benefits or lower benefits for its workers," according to Reuters.
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