If you heard about a recent Supreme Court case involving Obamacare, then you may be wondering what, if anything, has changed and how you are affected. So let’s take a look at what happened with the Supreme Court ruling and other recent news related to Obamacare. We’ll also give you some reminders about aspects of Obamacare that affect small- to mid-sized business owners in 2015 and 2016.
The Supreme Court Ruling on King v. Burwell
The future of Obamacare, or the Affordable Care Act (ACA), recently came into question when King v. Burwell was heard by the U.S. Supreme Court. Around 8 million Americans who had received health care subsidies to purchase health insurance would have been in jeopardy of losing their coverage had the court ruled in favor of the challengers in the case.
However, the high court’s June 25 ruling to uphold Obamacare pretty much means it is still on track as it was before, with its looming deadline for mid-sized employers not too far ahead in the distance.
The recent case was the second time the ACA has been challenged before and was upheld by the Supreme Court. The most recent case centered on whether Congress had the authority to require states to set up healthcare exchanges, and whether premium subsidies should be limited to state-run exchanges, as
the ACA’s language implied if taken
literally.
The 6-3 majority opinion by the Supreme Court reaffirmed that premium subsidies could be offered for health insurance coverage through health care exchanges, regardless of whether the exchange was federal or state-run.
The Small Business Healthcare Relief Act
Besides the recent court case, new legislation aimed at helping small businesses to lower health premiums and to have more options has been introduced in both chambers of Congress.
Many small business owners support passage of the legislation. In late July, the National Federation of Independent Business (NFIB) organized a rally of more than 150 small business owners in Washington, D.C., to support the law’s passage. If it passes, the legislation would overturn a 2013 ruling by the IRS that imposes high penalties on employers who offer tax-free reimbursement to their employees to assist them with the purchase of individual health insurance plans through Health Reimbursement Arrangements (HRAs).
The IRS ruled that such agreements are in violation of Obamacare requirements that forbid limits on the coverage of essential benefits and require preventative services to be covered for free.
Under the IRS rule, businesses are subject to an excise tax of $36,500 per employee per year if they continue offering such arrangements.
“This is a brand-new penalty that nobody knew about, and it’s huge,” according to an NFIB spokesman. The NFIB and other supporters of the legislation argue that small business owners with less than 50 employees, who can’t afford employer-sponsored programs and aren’t required by the ACA to provide coverage, are basically being penalized for trying to provide some financial help to their employees so they can purchase health insurance on their own.
The Small Business Healthcare Relief Act reportedly has bipartisan support in both chambers. If it passes, businesses with less than 50 employees would be able to continue to offer HRAs without a penalty.
Pay or Play Mandate in 2015 and 2016
The employer mandate, also known as “pay or play,” is one of the most important aspects of Obamacare that affects employers this year. In basic terms, it means that large employers – those with at least 100 full-time employees –have to offer healthcare coverage to 75% of their employees. Next year, this increases to 95%.
Penalties will be stiff if they don’t provide coverage and get caught. That’s because the penalty will be based on their total number of employees, not just on the employee or employees who weren’t offered coverage.
Next year smaller employers with 50 or more full-time employees will also have to comply with the “pay or play” mandate.
Because the rules for determining whether someone is a full-time employee or not are confusing, if your business is close to one of the cut-offs, you may want to seek professional advice from a lawyer or accountant who is well informed on the nuances of the ACA.
There are two different methods for determining full-time status for these employees. One involves counting the actual hours worked over successive weeks or months, while the other looks at the average hours worked during a “measurement period” of between 3-12 months.
Another thing to note is that seasonal employees do not generally fall under the same rules even if they work 30 hours per week. And employers also do not have to provide coverage for employees that fall under multi-employer plans, such as unionized workers.
The law is complicated even further by vague terminology. For example, employers are required to offer employees healthcare coverage that provides “minimum value” and that is “affordable.” But while the language is broad, there are actually complicated formulas for determining both. To be qualified as affordable, the law required that the coverage costs do not exceed 9.5% of an employee’s total household income. And guess what, there’s a whole separate formula for calculating this as well.
Documentation, Reporting and Notices
One thing that all employers are required to do this year is to provide a notice to their employees to make sure they are aware of the healthcare marketplace. This applies to all employers regardless of size.
All employers, especially if they were close to the 100 employee cut-off this year or the 50 employee cut-off next year, should also keep good documentation because they may have to prove to the federal government the method they used for determining things like employee status and percentage of household income.
The federal government will depend on the IRS to catch those who do not comply with the ACA. Employers will be required to complete a new tax form when they complete their tax returns in 2016, and the IRS will compare that against information gathered from the marketplace from persons who sought subsidized coverage, as well as information from insurance companies.
It’s important to note here that in June the IRS released new draft forms, despite having already released final forms and instructions in February. The updated forms only have minor changes as follows: the new Form 1095-B has an additional page for listing more covered individuals; new Form 1094-C has been renumbered; and new Form 1095-C now includes a box for the employer to indicate the first month of the plan year.
The IRS has announced that for 2016 reporting on Form 1095-C, new indicator codes will also be established to require employers to report conditional offers to spouses.
Small Business Health Options Program (SHOP)
Small employers can weigh their plan options on the Small Business Health Options Program (SHOP), an Internet-based insurance marketplace available to businesses with less than 50 full-time workers. It allows smaller employers to get the pricing that used to only be available to larger employers.
SHOP exchanges were originally scheduled to open in late 2013 but were delayed until late 2014, as resources were focused on the public exchanges for individuals. Also, employers have been slow to sign up through SHOP because a lot of business owners don’t even know about it.
