WHAT SHOULD YOUR BUSINESS KNOW ABOUT OBAMACARE?
By: Alejandra Garcia and Bobby Kouretchian
What does the Affordable Care Act mean for California businesses?
Perhaps you know it by its other name– “Obamacare.” The Affordable Care Act is now here and it has an effect on California businesses.
Before we can tell you how the new law will affect your business, one question must be answered:
How large is your business?
A business having fifty (50) or more full-time (or “equivalent full-time”) employees is considered a large business. Anything less than fifty (50) is considered to be a small business.
For the purpose of healthcare, a full-time employee is an employee that works an average of thirty (30) hours or more per week. The “equivalent of a full-time employee” is a combination of two part-time employees to equal one full-time employee. Therefore, businesses should ensure they make the appropriate calculations in determining their status.
What kind of effect for a small business?
Small businesses are not required to offer coverage. Nevertheless, they can now search for and enroll in an adequate health insurance plan for their employees (coverage under the plans will begin in January 2014). They have the opportunity to purchase insurance for their employees via The Small Business Health Options Program (SHOP). Please visit the SHOP website for more information.
How does SHOP work?
SHOP offers a variety of plans under four different categories: Platinum, Gold, Silver and Bronze (the more valuable the metal the higher the premium, but the greater the coverage). The employer will select the level of plan they would like to offer and the amount or percentage of contribution.
Small business owners may complete a “Request for Quote” form found on the site or contact an authorized insurance agent to assist in the enrollment process. The premium costs will not differ regardless of method used.
What kind of effect for a large business?
California’s exchange will offer plans to businesses with over fifty (50) employees starting in October of 2015. Those plans will go into effect in 2016. Until then, large businesses can continue to buy their health coverage in the private market.
When the law does go into effect for large businesses, they will be required to provide coverage that:
1) is affordable for the employee (e.g. employees contribution does not exceed 9.5% of household income); and,
2) covers 60% or more of health coverage.
At that time, large businesses must file an Annual Return reporting whether, and what level of, insurance is offered. If a large business has at least one employee qualified for the Premium Tax Credit, and also does not offer any type of coverage, than that business will be subject to an assessment. In such an event, the employer may have to pay $750 per employee as a penalty.
Large businesses not offering adequate health coverage will be subject to an assessment under the Employers Shared Responsibility Payment Provision (ESRP). Since an employer will not know whether or not an employee received the Premium Tax Credit, the Annual Return report will be used by the IRS in determining whether an employer will be subject to the ESRP. The employer will have the opportunity to appeal.
It is recommended that those businesses affected by the ACA stay informed and ensure compliance with any requirements applicable to them.
For additional information please visit www.irs.gov, www.CoveredCA.com or call (877) 453-9198.