Ready or not, the Affordable Care Act employer mandate will soon be upon us.
Employers with 50 or more employees will be required to offer insurance or pay a penalty starting in January 2016. This was supposed to go into effect in 2014, but employers were given more time to make the transition, with companies that have 100 or more employees making the change in 2015, and employers with 50-plus employees getting until the beginning of 2016; companies with fewer than 49 employees are exempt from the requirement. If small-business owners don't provide their full-time-equivalent employees (FTE) with health insurance, they will face a penalty of $2,000 per employee, excluding the first 30 workers. The insurance they offer must also meet a minimum value standard, or else face fees that may start at $2,000 per FTE.
And though the vast majority of small businesses may fall in the exempt range, those that aren't may have to do some hard cost-benefit analysis. The average single premium cost is $4,598 per enrolled employee. "Health insurance is expensive for any employer, but probably more so for the small-business owner—many can’t afford to provide healthcare to their employees," says Tracy Morley, legal editor for HR and employment law information services website XpertHR. "I think many small-business owners in this position will try to keep the number of employees under 50, so as not to have to comply with the requirement to offer health insurance."
The Threshold Risks
But staying under the threshold may not be without its own risks, according to Morley. "While employers that keep their staff low so as not to have to comply with the requirement to offer health insurance won’t be burdened with that cost, they may also be making themselves ‘unattractive’ to potential employees and have more difficulty recruiting employees compared to their competitors that offer healthcare coverage," Morley explains.
Though it's a bit late in the game—"Employers should have conducted an analysis of their workforce to determine whether they plan to offer coverage or pay the penalty," Morley says—there are still a few options and resources available to small-business owners.
"There are several key strategies that businesses can implement to reduce the impact of the ACA requirement," says Josh Lavine, president of Capitol Benefits, an independent insurance firm. His suggestions include:
- "Businesses can and should offer multiple plan options to choose from," Lavine says. "They can base their contribution on a less expensive plan and the employees can pay the difference if they want a more comprehensive plan. This allows the company to maintain compliance and still offer a higher level of coverage for those that want it."
- "One of the few remaining ways to offer a better benefits package to a certain group of employees is to offer different levels of employer contributions based on the length of time that they have been employed," he says. "This allows companies to contribute less to new hires and direct more of their contributions to those 'career'-oriented employees."
- "If the business is going to offer a high-deductible plan to employees as part of their strategy to maintain ACA compliance, they can add a Teladoc program for $10 per employee per month that will provide 24/7 access to a doctor at no cost," Lavine says. "This doctor can prescribe medication. The perceived value of a benefit package with just a high-deductible plan versus a high-deductible plan combined with a Teladoc program is significantly difference while the cost difference is minimal."
You can also visit the Small Business Administration and HealthCare.gov to get help with your company's ACA compliance. And though the focus right now is on the 50-FTE-and-up set, smaller companies should take heed, too.
"In addition to being prepared to comply with the requirement to either offer health coverage or pay a penalty," Morley says, "many employers, including employers with fewer than 50 employees that offer coverage through a self-insured plan, may be responsible for complying with the new information reporting requirements under the Affordable Care Act."
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
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