With all the changes in the implementation of the Affordable Care Act (ACA), also known as Obamacare, it can be difficult for a small business to know how to prepare. Should companies offer coverage, change policies, alter hiring habits or follow other strategies to limit rising health care costs and reduce the likelihood of paying government fines?
These and other questions are still issues that pallet and lumber companies are considering. Let’s review the basic facts. President Obama pushed back deadlines for companies to offer coverage or face fines. Starting in 2015, companies with 100 or more full-time equivalent workers will have to offer employees coverage or face a fine of $2,000 per employee after the first 30. The same mandate or penalty requirement will apply in 2016 for businesses between 50 and 99 workers.
Businesses with fewer than 50 full-time equivalent employees are exempt from the mandate. Companies that will be hit by coverage mandates have the following options:
• Renew existing small group plans for an additional two years even if those plans do not meet minimum standards set by the ACA.
• Replace existing coverage with a plan bought on a SHOP exchange.
• Discontinue or continue not offering coverage and encourage workers to buy a plan on the open market. This means the company will likely be forced to pay the $2,000 penalty, which may still be much cheaper than offering health coverage.
There are number of resources that can be helpful for small businesses to navigate the process including the healthcare.gov website as well as insurance brokers that can help you find the best rates and policies. Some companies are reducing workforce or restructuring to get below the 50 employee threshold. Keep in mind that this may not work if the owner also is connected in ownership to other businesses with total employees over 49 full-time equivalent workers.
The Internal Revenue Service (IRS) has already said that the tax penalties apply to a controlled group of companies with 50 or more full-time equivalent employees.
Controlled group rules take effect in a number of scenarios. For example, if five or fewer people own at least 80% interest in a group of companies, the companies are considered a controlled group and a single employer under the health care law. Spouses who own separate companies may also be considered a controlled group. Contact your accountant or attorney for more information to see how these rules apply to your ownership situation.
For purposes of defining a full-time employee, Obamacare defines a full-time employee as anyone who is employed an average of at least 30 hours per week (130 hours per month). Employers may determine current employees’ full-time status by looking back at a standard measurement period of not less than three but not more than twelve consecutive months.
Part-time employees’ hours will be converted into full-time equivalent (FTE) employees for the purpose of determining a company’s compliance requirements status. Conversion is done by adding up all of the hours worked by employees who are not full-time employees and dividing the total by 120. For example, if six part-time employees each work five hours per week, they will count as if the firm has one additional FTE employee.
One of the key question to consider is will employees opt out of coverage if you offer it. This has a lot to do with the cost of the plan you offer compared to the personal penalty for not carrying health insurance. Also, the health of the employee or his/her family could be a major factor. Companies are required to offer coverage to the worker that is considered affordable. This is defined by the ACA as the employee part of the coverage being less than 9.5% of an employee’s W-2 income. Another consideration is the true legal work status of an employee. Sometimes employees would rather spend that money on pleasures instead of insurance. And they may be concerned about legal problems if they turn out to actually be illegal aliens working under false pretenses.
The number one reason that Americans gave for not taking health insurance in a recent Kaiser Health Tracking poll was the cost. Nearly 40% of polled uninsured adults cited affordability as their main reason for skipping health insurance coverage. Twenty-two percent cited employment reasons (they were unemployed or couldn’t get coverage through their job), while another 11% said they missed the deadline and 9% said they just didn’t want insurance.
Overwhelming, the majority of workers in pallet and lumber companies are men. And they are more likely to see cost increases for health coverage even though they go for medical treatment less than women. The Centers for Disease Control and Prevention claims that even if you exclude pregnancy visits, women are 33% more likely to visit a doctor. Obamacare seeks to eliminate “premium discrimination against women. And the only way to do this is to offer fewer services or increase costs for everyone, especially men. And that is exactly what the ACA does. This may be another reason that many healthy, young men opt out of health insurance.
One thing that might make them obtain coverage is the personal penalty. This fine will go up progressively over the next few years. The fee in 2014 is 1% of your yearly income or $95 per person for the year, whichever is higher. The fee increases every year. In 2016, it’s 2.5% of income or $695 per person, whichever is higher. But this penalty will still remain much lower in most cases than the cost of coverage. Plus, many individuals qualify for an exemption from the requirement.
Individuals may qualify for an exemption if the following: the lowest-priced coverage available to you would cost more than 8% of your household income, you don’t have to file a tax return because your income is too low, you are an illegal alien, you are a member of a federally recognized tribe or eligible for services through an Indian Health Services provider, or you’re a member of a recognized health care sharing ministry or a recognized religious sect with religious objections to insurance, including Social Security and Medicare.
Some people are exempt due to hardships that can affect their ability to purchase insurance. This includes: being homeless, evicted in the last six months or facing foreclosure, receiving a shut-off notice from a utility company, experiencing recently domestic violence, going through the death of a close family member, suffering a natural disaster that causes substantial damage to your property, having to file for bankruptcy in the last six months, having medical expenses you couldn’t pay in the last 24 months, or experiencing unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
The government analyzes requests and decides whether to grant a personal exemption on a case-by-case basis. The reality is that many people will not have to pay the personal exemption if they go through the process of seeking an exemption. This is at least true for a short period of time
One major reason that there has been less concern over Obamacare recently is that only a small part of the law has been implemented to this point. The Obama administration pushed the enforcement deadlines back after receiving pressures from various interest groups.
The big question is, “Should you offer health coverage?” Consider this updated flowchart.
