What You Can Expect From The Affordable Care Act

Currently, the Act “requires health plans to refund a portion of premiums when the ratio between specific health care costs and premiums is less than the percentages designated by the Act.” Most businesses have received a rebate check, if you have not, you should check with your health care provider.

Here is what the Act does in its current state:

• Prevents insurance companies from having unchecked power to cancel your policy, denying your child coverage because of a pre-existing medical conditions, or charge women more than men.
• Bans insurers from setting a dollar limit on health coverage payouts.
• Requires insurers to cover preventative care at no additional cost to consumers.
• Requires individuals to have health insurance, either through their employers or a state-sponsored exchange, or face a fine starting in 2014. However, there are exemptions: the penalty will be waived for those with very low income, or who are in certain religious groups, or who face premiums that would exceed eight percent of their family income after including employer contributions and federal subsidies.

Starting in 2014, the Act ensures that “insurance companies can no longer charge you more, carve out benefits, or deny you coverage altogether because” of pre-existing conditions or because you are a woman.

Business With 25 or Fewer Employees:

If you employ 25 people or less, and their average annual wages are below $50,000, and provide health insurance for them, then you may qualify for a tax credit of up to 35 percent to offset the cost of your insurance, thereby lowering the cost of health insurance. In 2014, the tax credit will go up to 50 percent for qualifying businesses. However, the Act does not require businesses to pay for health insurance. To qualify, businesses must have: fewer than 25 employees; pay average annual wages below $50,000; and contribute 50 percent or more toward employee health insurance premiums.

Right now, 34 states have received 100 percent federally funded grants to build exchanges that will allow individuals and small businesses to compare private health plans. Either way, beginning next year, your business will be able to purchase insurance through the exchanges. Those plans will have to meet certain benefits and costs standards.

Business With 50 or Fewer Employees:

Again, the Act does not require that businesses provide health insurance. Beginning in 2014, small business with 50 or fewer employees will have the option of purchasing coverage through SHOP, a competitive marketplace. The White House website says, “The SHOP Marketplaces and Individual Marketplaces for those who are self-employed open on January 1, 2014. Open enrollment begins on October 1, 2013. Small Business Health Options Program (SHOP) will offer small businesses increased purchasing power similar to that of large businesses.”

Businesses With 50 or More Full-Time Employees:

Again, the Act doesn’t require businesses to provide health insurance. However, if your business has 50 or more employees, and one of those full-time employees receives a “premium tax credit to purchase coverage in an insurance marketplace” then you may be subject to an employer shared responsibility payment beginning in 2014. A full-time employee is defined as one who works an average of 30 or more hours per week. It is important to note that 100 half-time (working 15 hours a week) employees is equal to 50 full-time employees (working 30 hours a week). Employers with a combination of employees that adds up to 50 full-time employees will be considered a large employer (i.e. 40 full-time employees and 20 half-time employees).

“Employers average their number of employees across the months in the year to see whether they meet the large employer threshold. The averaging can take account of fluctuations employers may experience in their work force across the year.” Special transition relief is available to help businesses count their employees in 2013. For example, a company can use any six-consecutive-month period in 2013 and then have six months to analyze the results to determine whether it needs to offer a plan.

Employers will need to use information about the employees they employ during 2013 to determine if they will be subject to the shared responsibility provisions in 2014.

An employer will only be held liable for the shared responsibility provision if the employer doesn’t offer health coverage or offers it to less than 95 percent of it’s employees, and at least one full-time employee receives a premium tax credit to help pay for coverage on an exchange; or if the employer offers health care coverage to 95 percent and at least one full-time employee receives a premium tax credit because the insurance offered by the employer was either unaffordable to the employee or did not provide a minimum value. Affordable coverage is defined as no more than 9.5 percent of that employee’s annual household income. A minimum value calculator will be made available by the IRS and the Department of Health and Human Services.

Comments on the proposed regulations from the Treasury and IRS can be submitted by mail, electronically, or hand-delivered by March 18, 2013.

Taxes and Reporting

“The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.”

“A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.”

Story by Jennifer Taylor

For more information on the act and potential credits for small business, visit www.healthcare.gov/news/factsheets/2011/08/small-business.html.