With the Supreme Court ruling that the Patient Protection and Affordable Care Act is constitutional, many are now beginning to examine exactly what the law means and the new obligations it creates for employers. Below is only a general outline of the major portions of the law’s new requirements on employers, and employers are urged to stay informed on the new developments regarding the law (even at the time of this article the House of Representatives is already scheduling a vote to repeal the law). However, such measures to repeal the law are likely to not succeed unless the Republicans gain control of the Senate and White House this November 2012.
The employer mandate – employers with 50 or more employees
Businesses with fewer than 50 employees do not have to purchase health insurance for employees. Companies with 50 or more employees must provide “qualified” health insurance to their full-time employees and their dependents. A “qualified” health insurance means that the plans pay at least 60% of the health care expenses and cost less than 9.5% of employees’ household incomes. Companies with 50 or more employees that do not offer health insurance must pay a fee of $2,000 for each employee as long as only one employee from the company chooses to participate in state-run health insurance “exchanges.” This “tax” excludes the first 30 employees working for the employer, so an employer with 60 employees would need to pay $60,000 (30 employees x $2,000 = $60,000). The exchanges created by the law are an attempt to allow small businesses and individuals to pool their purchasing power to gain discounts in purchasing health insurance. The Small Business Health Options Program (SHOP) is an exchange created for small businesses specifically. Businesses with less than 50 employees may still choose to participate in the SHOP exchange, even though they are not taxed if they choose not to participate. Furthermore, only businesses with up to 100 employees are eligible to participate in the exchanges.
For businesses with 50 or more employees that do offer health insurance, but have at least one employee who opts out of the employer insurance and obtains a subsidy to participate in the exchange, the business is required to pay the lesser of $2,000 for every employee (exempting the first 30 employees) or $3,000 for every employee receiving the subsidy.
Employers with more than 200 employees are required to automatically enroll all employees in the health insurance program offered by the employer. Employees are then given an opportunity to opt-out of the company provided insurance.
The law provides that the hours for part-time employees are combined for purposes of calculating how many employees a business employs for purposes of the law.
The law counts part-time employees who have a combined total of 120 hours per month as one full-time employee.
The taxes imposed on employers explained above are scheduled to go into effect on January 1, 2014. There are also a series of tax credits for smaller businesses (defined as fewer than 25 employees and 10 employees depending on the credit) that do provide health insurance for their employees. There will no doubt need to be regulations clarifying many yet unresolved issues, and there will still be more legal challenges to the law in the near future. In the meantime, employers are well advised to begin planning for the effects of the law as it currently stands.
Author: Anthony Zaller, Van Vleck Turner & Zaller LLP. Los Angeles, CA / 323.592.3505 / firstname.lastname@example.org