Growing Your Business

Obamacare Refresher Course for Businesses With 50 or More Employees

by
Bob Mason
on
10/16/2017
Obamacare Refresher Course for Businesses With 50 or More Employees

After Donald Trump was elected president of the United States, most people believed that the Affordable Care Act, which is also known as “Obamacare,” would be eliminated quickly. However, Congress wasn't able to repeal this act after several attempts, and it now seems as if it is here to stay for the time being.

Because it seemed like Obamacare was going to be a thing of the past, many employers stopped worrying about its requirements. Now that it's clear that the act isn't going away anytime soon, it's time for an Obamacare refresher course.

What Is Obamacare?

Obamacare is the nickname given to the Affordable Care Act, a law that requires most Americans to either obtain health insurance coverage or pay a penalty. Under this law, businesses meeting certain qualifications are subject to the “employer mandate,” which means that they must provide affordable health insurance coverage for employees or pay a fine.

Responsibilities for Employers

If you are an employer with more than 50 full-time employees and “equivalent” full-time employees, you are subject to the employer mandate. If you aren't sure whether you fall into this category, simply use your employment statistics from the previous year to calculate the number of full-time employees and “equivalent” full-time employees working for your company.  Full-time employees are those who, for a calendar month, are employed an average of at least 30 hours of service per week with the employer. For this purpose, 130 service hours in a calendar month is treated as the monthly equivalent of at least 30 hours per week.  Solely for purposes of determining whether an employer has 50 or more “equivalent” full time employees an employer must also include for that month the number of equivalent full-time employee determined by dividing total number worked by employees that do meet the full-time definition (part-time employees) by 120 and adding that number to the full-time employees to determine whether you are subject to the employer mandate.

If you are subject to the employer mandate, you are required to offer affordable health insurance policies to at least 95% of all full-time employees (but not the part-time employees) and their dependents. However, you are not required to offer coverage to the spouses of qualifying employees at this time.

To satisfy the requirements of the employer mandate, the insurance plans you offer your employees must provide substantial coverage for inpatient services. They must also meet established “minimum value” standards. This means that the plans must cover a minimum of 60 percent of the cost of a standard population's medical services. In addition, your plans shouldn't cost more than 9.69 percent of the employee's annual income.

Understanding the Penalty

If the health insurance plans you offer fail to meet the minimum value standards, or if they cost too much, your company may owe a penalty. In general, your penalty will be equal to the lesser of $3,390 for every full-time employee who obtains health insurance coverage through the marketplace or $2,260 for every full-time employee minus the first 30.

If you owe the penalty for a given year, you will receive a notice from the Health Insurance Marketplace. The Health Insurance Marketplace sends this notice if one of your qualifying employees receives subsidized coverage. If this occurs, you will have a chance to appeal by showing that you offered the employee health insurance coverage that meets Obamacare standards.

Obamacare requirements and penalty calculations can be complicated for employers. If you think you may be subject to the employer mandate, a trained professional can help you determine whether this law applies to you and take steps to comply with its provisions. Please contact an accounting professional to learn more.

Bob Mason, CPA writes for TaxBuzz, a tax news and advice website. Reach his office at [email protected].

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Bob Mason

Bob Mason

Bob Mason is the founder of Coast Financial Services Inc. servicing both the Santa Cruz, and San Jose areas. Bob Mason is a skilled financial professional who is fully equipped to assist any of your accounting needs. Founding his firm in Santa Cruz, Bob understands the importance of small businesses and how they form the backbone of the area. Coast Financial Services, Inc. has been dedicated to the growth and profitability of businesses in Santa Cruz for 17 years. To learn more about Bob Mason and the rest of his team, visit their website.

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