If you own a moderately sized or large business, then get ready for big changes in 2015 over the way you handle health insurance. The Affordable Care Act, which took full effect for individuals last year, will now require that certain businesses offer affordable healthcare coverage to full-time workers. This stipulation was originally set to roll out along with the individual mandate in 2013, but lawmakers allowed a one-year extension to give businesses more time to prepare. Now, the government expects businesses to adhere to the "employer mandate," which forces businesses to offer coverage or pay a fine per worker.
Business owners throughout the United States have expressed concern that the employer mandate will bankrupt their businesses or force them to make tough staffing decisions. Employees, likewise, have anticipated reduced hours and salary cuts since Obamacare's implementation. Individuals who have taken advantage of Obamacare's insurance options have reported satisfaction in recent surveys, but it remains to be seen how the employer mandate will affect businesses in America.
Penalties Enforced for 2015
The biggest change coming to businesses in terms of health insurance for next year is that some owners will now face a substantial fine for not insuring their full-time workers. Under the new law, businesses that staff more than 100 full-time employees in 2015 will have to offer affordable health insurance to at least 70 percent of their full-time workforce or pay a penalty fine worth $2,000 per employee after the first 80.
What qualifies as affordable, and how do businesses determine who gets insurance? These questions worry some business owners, but the law is fairly straightforward when it comes to the numbers. A full-time worker is someone who works at least 30 hours per week according to the government, and insurance can't cost more than 9.5 percent of an employee's income as reported on his W-2 form.
It's not enough for employers to simply offer insurance; the plan needs also needs to be affordable by the 9.5 percent rule. If a single worker can find a cheaper plan on the marketplace and she qualifies for a subsidy, then the business will be charged the $2,000 fine for failing to meet the affordability stipulation.
In 2015, the employer mandate only applies to businesses with more than 100 full-time workers, and the fines will be assessed if those employers don't offer insurance to at least 70 percent of their staff. The fine stays the same for next year, but the stipulations change. Moderately sized businesses will be required to participate in the employer mandate while companies nationwide will be required to increase the number of employees that they insure.
New Requirements Going Forward
The employer mandate requires all businesses with more than 50 full-time workers to participate in the health insurance system by 2016. Starting that year, businesses with more than 100 full-time employees will have to offer affordable insurance to 95 percent of its full-time staff. Mid-size companies with 50 to 99 employees will join larger companies in the mandate requirements in 2016.
Regardless of size, the penalty fine for not insuring full-time workers remains the same. However, going forward into 2016, businesses will only be able to exclude 30 employees when calculating fines. The $2,000 fine per person will apply to all employees after the initial 30. For mid-size companies, a fine of $2,000 per person may make a bigger difference in determining whether to obey the law or pay the penalty fee.
Concerns from Business Owners
While the law appears straightforward from a technical standpoint, there are factors that cause some confusion among business owners. For starters, full-time status isn't always as easy to calculate for companies that employ short-term labor during busier seasons like the holidays. Freelance and contract workers may not qualify as employees for one-time gigs, but consistently employed contractors may fall within a gray area for calculating full-time worker status.
Experts recommend that businesses with fluctuating staffs consult tax professionals for a detailed analysis of their legal obligations under the Affordable Care Act. Larger companies don't have much legroom with 2015 right around the corner, but mid-size companies should take the next year to determine their responsibilities under the law. Some companies may choose to staff fewer full-time workers in order to avoid the mandate and fine altogether. The decision to avoid both fine and mandate worries some workers across the country. Employees fear that businesses will cut jobs or reduce hours in an attempt to save money.
Others are concerned that companies will simply opt to pay the fine instead of offering insurance. As an example, let's say a business employs 300 full-time workers. Instead of offering insurance, the company decides to pay a fine because it's cheaper in the short term. This company would have to pay $2,000 per employee after the first 80 in 2015, which in this case means 220 employees or $440,000 for the year. For a business this size, the fine is not unreasonable compared with the total cost of insuring employees and their families.
However, some business owners argue that paying for insurance is just part of the cost of doing business in today's economy. With a competitive job market and company reputation on the line, a majority of companies will offer some type of health plan to attract good workers. In fact, most medium to large businesses in the United States already offer health insurance. The difference in the next couple of years will be in how those companies adjust to higher rates proposed by major insurers.
Rate adjustments for 2015 will play a big role in how many businesses choose to offer insurance versus just paying the penalty fee. In some states, major insurance providers like Blue Cross Blue Shield have already quoted significant price hikes for businesses. Independent agents have had to deliver equally upsetting news to corporate clients as price hikes reach 40 percent in some areas.
Still, the long-term cost of providing quality health insurance may offset the short-term price tag for many businesses. Under the new guidelines, insured individuals are entitled to ten essential benefits that include things like preventative care, mental health care and hospitalization. By providing healthcare coverage, employers ensure better access to routine care. Healthier employees typically work better and harder, and companies may consider this fact in determining their insurance strategies for 2015.
Tax Breaks for Small Businesses
Small business owners won't have to worry about the employer mandate. The Affordable Care Act exempts businesses with fewer than 50 full-time workers from insuring their employees or paying a penalty fine. However, small businesses that do offer affordable insurance plans to their staff could receive tax breaks worth up to 50 percent of the cost of insurance. The tax credit is designed for small businesses with fewer than 25 full-time employees. Small business owners can use the Small Business Health Options Program or SHOP via the federal health insurance exchange website to enroll in a plan for themselves and their employees.
For a complete breakdown of the federal requirements under Obamacare, business owners should check out the HealthCare.gov website. Small business owners can browse plans on the SHOP anytime throughout the year, which means they don't need to wait for the open enrollment period that began for individuals on Nov. 15.