When the Affordable Care Act (ACA) was signed into law on March 23, 2010, there were equal cheers and disappointment as the nearly one thousand page law was coming to be. Strict regulations and guidelines for businesses have been set to evolve since the signing. Knowing if your business is required to be compliant, what your responsibilities are, and how the law impacts your operations, are critical components to ensuring your business is not in violation of the law.
Who is Required to Provide Group Health Insurance?
As of January 2016, businesses with 50 or more employees (previously 100 or more) are required to offer major medical health insurance to their employees. Like all medical policies on the market now, standard benefits must include maternity coverage, a yearly wellness exam, pediatric dental and vision, mental health, and prescription coverage. If your policy is missing any of these essential benefits, it’s time for a health policy ‘check up’.
Reminder: not complying can result in a hefty penalty for your business!
Also new in 2016 was the requirement for W2s to have reflected whether employers offered group sponsored health insurance in 2015. Box 12 on W2 forms should have reflected both what the employer and employee contributed towards costs on a group major medical plan.
Reminder: as an employer offering group insurance, you are required to contribute the minimum amount of 50% of the cost.
As you start your search on the market for group health insurance policy that meets both your financial budget and your employees’ needs, consider the methods of how you will obtain insurance. You’ll want to ensure that you’re stretching those premium contributions to give you the most possible benefit, which impacts that expense line.
- Broker: Call a licensed broker for your state. A good broker will work with multiple carriers and be able to quote you on a variation of policies based on your wants and needs. Using a broker is free of charge and they’ll assist you in sorting through the red tape and offering clarification and guidance. This approach saves you time as you only tell one person what you are seeking. (Make sure they posses a valid state license.)
- Carrier: Call each carrier who offers plans in your headquartered zip code. Not all carriers offer plans based on geography. This will require you to call multiple carriers and speak with several representatives to obtain quotes.
Federal SHOP or State Exchange: Multiple states have established their own exchanges since the passing of ACA. Other states reserve the right to participate on the federal exchange. As a small business you can work with the health exchange to qualify for federal subsidies to assist in offsetting costs.
I Want to Offer Group Health Even Though I Am Not Required
Great! You will have the same options as those that have a mandate. Additionally, you’re able to consider utilizing tax code 125. Never heard of it? You’re not the only one! Here’s how it works. You’ll receive the tax benefits of assisting your employees with their individual/family coverage, but are not on the hook for the steep demands set forth by the government.
It’s a recommended practice to treat all employees fair and equal. Either provide each employee a set dollar amount or percentage for them to apply towards their individual/family plan they purchase. This requires an accountant to help you establish. If you need a referral, let us know!
As a small business with 50 or fewer employees, you may also qualify for additional tax incentives or federal assistance when offering group health insurance. Determinations are made on the number of employees, employees participating in the plan, average salary, and your contributing costs. Policies can be compared on healthcare.gov SHOP or with a health insurance broker.
What is My Premium Providing Me?
Not all policies are created equally on the networks they offer. More condensed networks with greater restrictions are often lower in premium, but have more out of pocket expenses associated with them. As an employer, make sure the premiums you are contributing provide choices on doctor and hospital selections. A nice complement to any major medical plan you’re offering (at no required cost to you) to decrease your claims costs, are telemedicine, critical illness, and accident medical expense riders.
What Lies Ahead: Start Preparing Today for Section 49801 of the ACA, the Cadillac Tax!
The Congressional Budget Office (CBO) has announced that 26% of employers in 2018 are going to be looking at a 40% excise tax that will raise $87 BILLION in 10 years and grow to 76% of employers by 2023. When the law takes effect in January 2018 (possibly delayed to 2020), an employer whose policy premium totals $10,200 for an individual (combined contribution) and $27,500 for a family (combined contribution) will owe Uncle Sam a tax for any costs ABOVE the threshold. Each year the threshold will increase to keep current with inflation.
Our recommendation is to seek assistance if you are unclear on what the requirements are to both your employees and the federal government. Working with a third party will not cost you a penny and they will ensure the plan you select meets your budget requirements, employees’ needs, and that you’re 100% compliant with Uncle Sam’s rules.
images by:
Jakob Owens