Q: Do I have to offer health insurance?
A: If you have 50 or more full time or full time equivalent employees and one or more of your employees receives premium credits (government subsidies) to help purchase health insurance in the exchange, you are required to offer health insurance or pay a penalty. If no employees receive subsidies, then you are not required to offer health insurance and pay no penalty.
In addition, if you have 200 or more full time or full time equivalent employees, you are required to automatically enroll each employee in the company sponsored health plan. They can then choose to opt out. This requirement has been delayed until sometime later in 2014.
Q: What defines a full time employee and what is a full time equivalent?
A: A full time employee is defined as anyone who works 120hrs/mo. The number of full time equivalents is calculated by adding up all the part time hours worked by your part time employees in a month and dividing it by 120. You cannot avoid the obligation to provide insurance by making everyone a part time employee.
EX1: You have 40 FT employees and 20 PT employees who average 80 hours per month. FT + FTE = 40 + (20*80/120) = 40 + 13 = 53. You are required to offer health insurance or pay a penalty.
EX2: You have 20 FT employees and 40 PT employees who average 80 hours per month. FT + FTE = 20 + (40*80/120) = 20 + 27 = 47 – You are not required to offer health insurance.
Q: How much is my penalty if I don’t offer health insurance?
A: Penalty = (# of employees – 30) * $2000.
EX: A company with 60 FT and FTE employees – (60-30)*$2000= $60,000/year = $1000/employee.
Q: If I offer a group plan, what are requirements so I don’t pay a penalty?
A: In general, minimum requirements for a ACA compliant health plan are that it limits deductables to a maximum of $2000 for an individual and $4000 for a family and limits maximum out-of-pocket expenses over and above the deductible to $6400 for an individual and $12800 for a family. The plan must also offer all the "Essential Benefits" as defined by the ACA, such as a free physical each year and unlimited coverage.
Q: Can I offer a group plan and still owe a penalty?
A: Yes. If the health plan is not ACA compliant or if the premium to be paid by the employee is more than 9.5% of the employee’s household income, then the employee qualifies for help through an exchange. The employer then pays $3000 penalty for each employee that uses the exchange.
Q: Are there other ways to offer health insurance for my employees that may be less expensive?
A: Yes. In many cases it may be less expensive overall for both the employer and the employee to pay the penalties and then purchase short term major medical insurance through a Section 125 PRA. Under a PRA, the employer can fix their health insurance costs much the same way they do with a 401K plan. Any contribution made by the employer is in the form of pre-tax dollars. Employees can have money withheld from their check in pre-tax dollars to pay premiums. The net result is a lowering of the taxable income for the employee and a lowering of the FICA matching requirement for the employer. In many cases, even including the penalties the employee and the employer save over 50% compared to a ACA compliant plan.
Q: Are there any scenarios under which I could not offer health insurance and still not owe a penalty?
A: Yes. If you have less than 50 full time and full time equivalent employees.
Q: Does my employer have to offer health insurance?
A: No. Employers who have fewer than 50 full time and full time equivalent employees are not required to provide health insurance. Those with more than 50 are required to either offer ACA compliant plans or pay a penalty.
Q: Do I have to take my employer’s plan?
A: No. You can always apply to an exchange, either public or private, to see if coverage is cheaper for you and your family through an exchange. If you work for a company with more than 200 full time and full time equivalent employees, and your employer offers a health plan, your employer is required to automatically enroll you in their plan. You can opt out if you chose.
Q: Are there less expensive options available for health insurance?
A: Yes. For those families whose household income is between $65,000 and $300,000 per year, paying the penalty and applying for short term major medical plans that provide 2 million dollars of coverage per person per year will result in savings of 40% to 60% over the cost of an ACA compatible plan.
Q: How much is the penalty if I don’t buy ACA compliant insurance?
2014:Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater.
2015: Penalty is $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is greater.
2016 and beyond: Penalty is $695 per adult and $347.50 per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater.
Q: Who collects the penalty?
A: The IRS as part of your annual income tax return. You will be required to show that you had ACA compliant health insurance for yourself and every member of your family for a minimum of 9 months of the year.
Q: Are there other options besides buying insurance on a government exchange?
A:Yes. Many insurance brokers will provide private exchanges that offer all the products available on the public exchanges plus additional products and services. In addition, some health insurance carriers that may service your area, have opted not to participate in the government sponsored health exchanges, but instead are relying on brokers to sell their products. Brokers will be able to provide access to all the government subsidies as well as a broader range of compatible products.
Q: When can I sign up for health insurance?
A: As of now, the plan is to have open enrollment between Oct of 2013 and Mar of 2014. After that, normal open enrollment will occur between Oct and Dec. of every calendar year with the plans going into effect as of the 1stof January of each calendar year. There are a series of qualifying events that will allow people to sign up for health insurance in between the open enrollment periods, but simply coming down with a serious illness or having an accident are not qualifying events. In these cases, you will be fully responsible for any and all medical bills. It is advisable to have some form of insurance in place at all times, either ACA compatible or short term major medical coverage.
Q: How do I sign up for health insurance?
A: Contact your USA Benefits broker. The price for any health insurance plan, whether you purchase through a government exchange or a private exchange is exactly the same. The advantage of using a broker is that the broker works for you, not the government or the insurance company. They have access to more options that the government exchanges and represent a broad cross section of companies. You’ll get the best deal that fits your family and needs from an experienced broker.
Q: When do the new ACA compliant health plans go into effect?
A: Plans typically will have a Jan. 1steffective date. There are a number of “qualifying events”, such as loss of a job, divorce, death of a spouse… that can trigger someone to get health insurance in the middle of the year, but for most situations the open enrollment will be between Oct. and Dec. and the effective date will be Jan. 1stof each year.
Q: What happens if I don’t sign up for health insurance, decide to just pay the penalty and then sometime during the year I get sick?
A: There are several qualifying events that make it possible for people to enroll in a ACA qualified health plan outside of the open enrollment period. Accidents and illness are not qualifying events. In other words if you do not elect a health plan during open enrollment, between Oct and Dec of each year, after Jan. 1stof the following year, you will not be able to obtain any form of health insurance until Jan 1st of the following year.
Alternative: An alternative for those who want to keep insurance costs low and still maintain coverage is short term major medical coverage. It is typically 40% to 60% cheaper than exchange plans, provides $2,000,000 worth of coverage and renews every year. It is the ideal choice for those who are reasonably healthy and want to provide basic coverage for themselves and their families.