What does ACA mean for my business or employer?
The Affordable Care Act (ACA) changes the way an employer buys and offers insurance to employees. Under the ACA, large employers (50 full-time or full-time equivalent employees or more) are required to offer affordable health insurance to their employees.
Calculate your number of full-time employees and full-time equivalent employees
The ACA states that employers are also responsible for the following:
- Providing notice to their employees of their health insurance options, including coverage through the Marketplace, and a description of how the employee may contact the Marketplace for help.
- Since 2015, large employers that do not offer health insurance coverage will have to pay $2,000 for every full-time employee (not including the first 30 employees) if any obtain tax credits for purchasing health coverage through the Marketplace. This penalty will increase each year as insurance premiums grow.
- Since 2015, employers that offer unaffordable coverage, or coverage that does not cover at least 60 percent of costs, will pay $3,000 for any employee who receives a tax credit in the Marketplace and up to $2,000 for every full-time employee (not including the first 30 employees). This penalty will increase each year as insurance premiums grow.
- Since 2015, employers with more than 200 full-time employees will be required to automatically enroll all employees in health insurance plans.
Tax credit penalties
Federal tax credits are available for low-income individuals and families with an income under 400 percent of the federal poverty level, and are not otherwise eligible for Medicaid. These tax credits are provided on a sliding scale if your employees choose to purchase insurance through the Marketplace. When this occurs, large employers could be penalized. To learn more about these penalties call Geisinger's Trusted Advisor Healthcare Reform information line at 855-849-1510.
Selecting insurance coverage through the Small Business Health Options Program (SHOP) Marketplace
Since Oct. 1, 2013, businesses with up to 50 employees can purchase coverage through health insurance marketplaces. Since 2016, the marketplaces are open to employers with up to 100 employees. As a business owner, you can log on to one of the marketplaces, compare the plans for cost and benefits, and assign one to your employees. Your employees must then sign on to the same marketplace and enroll in the product you selected.
In Pennsylvania, employers with less than 50 full-time equivalent employees may select one qualified health plan to offer their employees through the Small Business Health Options Program (SHOP) Marketplace with coverage beginning in Jan. 1 of the following year. Small-business employees will be able to choose from the full range of plans in the marketplace with coverage beginning on Jan. 1 of the following year. An employer is "qualified" to participate in the Marketplace if, in addition to size, the employer elects to make all of its full-time employees eligible for one or more qualified health plans.
The health insurance plans available in the SHOP Marketplace will be run by private health insurance companies. All plans will offer the same benefits as a "typical" employer plan, including catastrophic protection.
Tax credits for employers
Large-group employers are not eligible for tax credits under the ACA.
Small-business owners with less than 25 full-time equivalent employees with an average annual wage of less than $50,000 qualify for a tax credit. To receive the maximum tax credit, the business needs to have 10 or fewer full-time employees with an average taxable wage of $25,000 or less. The credit is phased out as the number of full-time employees increases from 10 to 25 and as average employee compensation increases from $25,000 to $50,000. To be eligible, the employer must cover at least 50 percent of the cost of healthcare coverage for their employees. The amount of the credit is determined by:
- Number of employees - This is determined by totaling all of the employed hours of all employees (part-time and full-time), then dividing that number by 40 (hours per week). If the resulting number is less than 25, your company qualifies for the tax credit.
- Average annual wages.
There are two phases for the tax credit. For tax years 2010 until 2013, eligible employers may receive a tax credit of up to 35 percent of the employer's contribution toward the employee's health insurance premium.
For tax years 2014 and later, eligible small businesses that purchase coverage through the state Marketplace may receive a tax credit of up to 50 percent of the employer's contribution toward the employee's health insurance premium. Employers are eligible to take the tax credit for two years.
Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25 percent of the employer's contribution toward the employee's health insurance premium for tax years 2010 to 2013, and up to 35 percent for tax years 2014 and later.