BY MADELEINE MACCAR
BY NOW, YOU’VE MOST LIKELY DONE YOUR DUE DILIGENCE TO MAKE SURE YOUR COMPANY IS IN COMPLIANCE WITH THE AFFORDABLE CARE ACT(ACA, also colloquially called “ObamaCare”), as the extension of the employer mandate’s full implementation date has been pushed back to its final “go” point of January 1. Starting in 2016, the mandate requires that all businesses with 50 or more full-time or full-time equivalent employees (FTE) provide health insurance to at least 95 percent of those employees and dependents up to age 26, or pay a penalty, which is referred to as Employer Shared Responsibility Provisions.
But there are a seemingly infinite number of resources available to guide you through these new requirements, which makes it difficult to start making sense of the mandate without some expert guidance. It is recommended that if you have any concerns at all, reach out to an insurance professional or broker who can distill the vast ocean of information into manageable bites to ensure you’re compliant.
So where do I start?
The key starting point is determining whether or not you even need to file a report for your company, which is hinged upon not only your full-time employees but also the number of part-time employees you have, too. So if you had fewer than 50 full-time or full-time equivalent (FTE) employees in the previous calendar year, you are among the many smaller businesses that are neither obligated to file reporting requirements nor offer your employees health insurance.
But wait: It’s those FTE employees who might be the deciding factor for you. While a full-time employee is flatly defined as one whose service hours average at least 30 hours a week or 130 hours a month, the FTE definition is a little broader and requires a little bit of company-specific arithmetic.
You arrive at the number of your FTE employees by adding up each of those worker’s monthly hours and dividing that total by 120; the result is your FTE. So if you have two part-time employees who each work 15 hours a week, together they account for the equivalent of one FTE employee. Once you reach the 50 employee threshold, regardless of how you arrived at that number, your company is an applicable large employer (ALE), and you must report as such for the 2015 tax year.
Also bear in mind the sum of full-time and equivalent employees among all companies sharing an 80 percent or more common ownership, which accounts for one company, according to the Aggregated ALE Group—or control group—provision. This safeguard was put in place to prevent companies from being restructured into smaller subsets to sidestep the employer mandate.
So say you own a luxury transportation operation as well as a detailing company, taxi service, or any other business under one common umbrella. Even if you are offering benefits to the 500 FTE employees at your largest company, you must also offer those same benefits to the 25 FTE employees at your smallest company.
While companies both small and large must continue to withhold and report an additional 0.9 percent on employee wages/compensation exceeding $200,000, some ACA provisions apply only to large employers. Businesses of both sizes may also be required to report the values of the health insurance coverage provided to each employee on their W-2 forms. Self-insuring companies of either size may also have to pay a fee to help find the Patient-Centered Outcomes Research Trust Fund, an institute that will assist patients, clinicians, purchasers, and policy-makers in making informed health decisions.
What if I’m a small company? (49 or fewer FTEs)
If you have less than FTEs, are not part of a common ownership pushing you over the threshold, and want to offer insurance (again, you are not required), you can purchase affordable insurance through the Small Business Health Options Program (SHOP). If you have fewer than 25 FTE employees who average less than $50,000 in annual wages, you also may be eligible for Small Business Health Care Tax Credit if you cover at least 50 percent of your FTE employees’ premium costs. Purchasing through SHOP is meant to give small employers the same buying power as large companies. You will have to meet a minimum participating rate (generally 70 percent, but varies by state) in order to purchase through SHOP.
If you’re a small company who offers insurance benefits, it was optional in 2014 to file an annual return reporting certain information for each employee you cover: Such reporting is now mandatory.
What if I’m a large company? (50 or more FTEs)
The only people who won’t have to buy health insurance or pay a penalty are those who are exempt on certain religious grounds, members of Native American tribes, undocumented immigrants, current inmates, and individuals whose income is below a certain level; it is a requirement for everyone else, employers and employees alike.
Large companies—ALEs—must now report annually on whether and what health insurance they offered to full-time and FTE employees. If you do not offer adequate, affordable coverage to your qualifying employees, you may be subject to a penalty.
A number of ALEs are choosing to accept a penalty per employee, minus the first 30, instead of offering insurance benefits. In 2016, large employers with 50 or more employees that don’t offer coverage to 95 percent of employees face a penalty of $2,000 per full-time employee if at least one employee receives a government subsidy—or tax credit—to buy coverage on the Health Insurance Marketplace (exchanges).
If you offer coverage to employees but their share of the premium is considered unaffordable, you may also pay a penalty. Note that “affordable” is defined as employee-only coverage that is less than 9.5 percent of their household income. Since you don’t often know what that total is, a safe bet is to ensure that the employee’s portion of employee-only coverage does not exceed 9.5 percent of their income.
How is the industry handling this?
As many chauffeured ground transportation companies are exempt from the mandate, the reporting requirements aren’t applicable to them; however, with the open enrollment period coming up fast, you are running out of time to get your house in order.
Nour Elotmani of Destination MCO in Orlando, Fla., says that after employees had been clamoring for insurance benefits, the company brought in insurance brokers to meet with everyone in one-on-one sessions—which ultimately resulted in the staggering majority of the MCO team discovering that they benefited more from plans offered through the ACA marketplace (exchanges) than those provided by the company.
“We brought in a couple brokers and they dissected the health benefits offered through ObamaCare to the team, so they heard from experts outside of company management,” he says. “All employees but one were going to benefit from going through the exchange—the only exception was one manager. Everyone else was getting a better deal through the exchange.”
Elotmani said that bringing in insurance professionals helped tremendously, as they were able to effectively correct any employees’ misconceptions about the benefits available to them. Outside professionals were also invaluable to the management team, too, especially since MCO’s rapid growth pushed the company over the 50-employee threshold, making it mandatory for them to offer insurance in the first place.
For the people who are within the age of Medicare, we have really tried to help them understand that they have these great medical benefits they can take advantage of...”
- Kim Garner of BEST Transportation of St. Louis
“The brokers were able break it down for them in terms they can understand so they can make their own decisions,” Elotmani says. His advice to other companies who are considered ALEs is just to bite the bullet and accept the new rules of health care reform. “If you’re growing like we have been, just offer your employees the benefits and get it out of the way. It’s a reality that’s here to stay.”
Kim Garner of BEST Transportation of St. Louis in St. Louis, Mo., and her sister Debbie Rudawsky have 115 eligible employees—and have always felt it was incumbent upon them to offer benefits like health care, PTO, and holidays to those who contribute to the success of their business. However, Garner says that they’ve been nudging their of-age team members toward Medicare with the onset of the ACA requirements.
“Last year, because of ObamaCare, we had to change all of our benefits so that we had equal benefits that could be offered to everybody, including all of our eligible full-time chauffeurs,” she says. “We do pay about 60 percent of the cost—but, for the people who are within the age of Medicare, we have really tried to help them understand that they have these great medical benefits they can take advantage of where it’s going to be a lot less expensive overall, they get better coverage, and all that. We want them to understand all the options that they have.”
One of the biggest challenges is getting her staff to understand that denying coverage is not an option, and offers a firsthand cautionary tale within her own work family: Nearly a year ago, a chauffeur insisted he couldn’t afford health insurance and opted out—only to suffer a heart attack a month later. Garner says that he now works as a detailer since he can no longer drive, but has since racked up almost $1 million in medical bills.
“We’re really trying to educate our staff on how this is something you need to have,” she says. “I know it’s expensive, but it’s going to be more expensive if something happens.”
Garner adds that she has seen how BEST’s employees appreciate the time the company has taken to make sure the whole team understands the inherently confusing nuances of health insurance. And in a time when it’s hard to hold onto quality chauffeurs, both Garner and Elotmani say that offering health insurance also happens to be a useful recruiting tool.
“If the other operators in your market don’t offer health care and you do, it can really be a good thing for you: I know that we have chauffeurs who stay with us because of the benefits,” Garner says. “If you want to be a corporation, you need to treat your team like a corporation and offer them what other industries do. It’s costly to implement, but it is so important.” [CD1015]
THESE RESOURCES MIGHT SHED SOME LIGHT ON AN ARRAY OF ACA-RELATED TOPICS.
A federal government website managed by the U.S. Centers for Medicare & Medicaid Services, this should be your first stop. Follow the “Small business” tab at the top to tap into a range of official—and helpful—resources.
Here you’ll find a wealth of topics about the tax provision side of ACA. Its “Employers” section offers information for both large and small companies, and lays out much of what you’ll need to know in straightforward, bulleted facts.
Click on “I’m an employer” and let this do-it-yourself flow chart answer questions like “Can I continue to purchase coverage through my insurance agent?” or “What should I look for in a health plan?” This site is run by University of Pittsburgh Medical Center, one of the country’s leading nonprofit health care providers.