The Patient Protection and affordable Care Act “Obamacare”
ObamaCare and Large Employers
Beginning in 2014, individuals and certain businesses will be required to purchase health insurance. Businesses with more than 50 full time employees, or full time equivalents, are considered “large employers”, and must offer a certain minimum level of affordable health coverage for their employees, or pay a penalty. Businesses with more than 200 full time employees must automatically enroll new hires into their health plan, with an option for the employee to decline coverage. This is different from the current “opt-in” choice employees have now. Employers in this category that choose not to offer health insurance to their employees will be fined roughly $2000 per employee, excluding the first 30 full time employees. This is important in calculating your actual penalty if you are on the employee number threshold. I have analyzed a client with part time equivalents that put them over the 50 employee threshold. The only eligible employees are full time employees and since this employer only has 28 full time employees, he will not face a penalty for not offering coverage due to the exclusion of the first 30 full time employees.
The New Full Time Work Week
ObamaCare has redefined the full time work week as it pertains to health insurance reform. Full time, when discussing individual employee eligibility for coverage, is defined as an average of 30 hours per week. Employers have already started to look at their current part and full time staff to determine if they have more full time workers than previously thought. Regardless of the employee’s classification as full or part time right now, starting in 2014, if they work 30 hours or more per week, they are considered full time for computing healthcare eligibility and penalties.
Full time equivalents can be calculated in two different ways, which one will be utilized is up in the air right now, as I have read both ways presented as the calculation. When calculating actual client totals, both ways produce very similar results.
Take all part time employees, and get a sum total of all hours worked. When we look at this on a weekly basis for ease, you would divide this total number of hours by 30, the full time work week now, to get your full time equivalent. 15 employees that average 25 hours per week will give you a full time equivalent of 12.5 full time employees (375 total hours divided by 30).
The other method is to simply take the total number of hours worked by all employees, and divide by 30 (when looking at this on a weekly basis). The difference in the two methods is that in this one, all hours are, even full time hours, used to get the sum total of hours.
If I had to guess, I would say that the first method will be used in calculating the full time equivalent. As it reads, “part time hours” will be used to determine full time equivalents, therefore, it seems to reason that full time employee hours will not be included in this calculation. That said, it would not surprise me to see them use both calculations, and basing eligibility on the higher of the two calculations
If you own a business with less than 50 full time employees or full time equivalents, you will not be required to purchase health insurance for your employees. These businesses will not be subject to a penalty for not offering health insurance to their employees.
Businesses with 25 or fewer employers will have the option, beginning in 2014 to purchase health insurance for their employees on the State Insurance Exchange. While there is no penalty for not providing this coverage, employers in this category that do want to offer health coverage, may find a less expensive product via the State Insurance Exchange. Beginning in 2016, states will have the option of making employers with 26 to 100 full time employees eligible for this State Exchange option.
Employers with Multiple Small Businesses
What we know right now is that if you own multiple businesses, the employee totals for the purpose of healthcare eligibility, will be the sum total of all employees from each business. This means that if you have 4 businesses with 20 full time employees each, you will be considered a “large employer” and subject to supplying health coverage to your employees or face a fine as described above.
We are not sure how smaller percentaged owners in multiple businesses will effect the employee totals for the purpose of healthcare eligibility. It appears that common active ownership will cause multiple small businesses to be grouped together for purposes of determining health coverage eligibility.
The individual mandate requires every adult American citizen to either purchase health insurance or pay a tax penalty. These fines will be included in their tax returns. Individuals not covered under a company policy will have the option of purchasing insurance through the State Insurance Exchange. Depending on income, individuals may qualify for federal subsidies to offset the cost of their health insurance.
This is an extremely complex piece of legislation. Each employer will have their own set of circumstances that they need to consider. Please feel free to call Robert Petro at ELM (251-470-0700) with any questions, or to discuss your situation specifically. Employers that are on the threshold of the employee numbers above, are encouraged to call and have a review of their situation as it pertains to the new requirements taking effect in 2014.