Once a majority of the Supreme Court gave its imprimatur to the healthcare law in a split decision issued June 28, 2012, there was no denying the inevitable. The Patient Protection and Affordable Care Act - or at least major parts of the law - is here to stay. What this means for small business was the topic of a recent must-see NFIB webinar.
According to Kevin Kuhlman, Manager of Legislative Affairs at NFIB, “two of the most important components are the individual mandate and employer penalty, both of which go into effect in 2014.”
Beginning in 2014, all U.S. citizens and legal residents will be required to have "minimum essential coverage" for themselves and dependents or face a penalty. In addition, employers with more than 50 full-time employees (or the equivalent in full and part-time employees discussed below) are considered “large employers” and must provide health insurance for all of their full-time employees. These employers are required to pay at least 60 percent of the costs of health care for their employees. Employers with more than 50 employees who do not offer coverage will be subject to fines. Businesses with fewer than 50 employees are not required to provide health insurance to their employees.
Review the archived webinar today to find out what the individual mandate means for your employees and your business and whether you’ll be subject to the employer mandate. But if you are short on time, keep reading for Kuhlman’s advice on PPACA essentials for small business.
2013 – The year of planning and preparation
This year is the year to determine whether your business is large or small. Large is 50 or more full-time equivalent employees. Temporary employees do not get counted towards the employer – they get counted to the temp agency’s size. Contract employees will not be counted towards the employee threshold.
When it comes to the large employer mandate, Kuhlman warned, however, that employers need to be careful in determining who counts and who doesn’t count as an employee. Misclassified contractors will land a business in hot water with the IRS and state agencies.
This is also the year to provide the notice of exchange eligibility. The federal government has not yet provided a document, although Kuhlman predicts a notice will be available for employers to distribute.
2014 – The rubber meets the road
This is the year that things kick into high gear. In 2014, health insurance exchanges will beopen to individuals and small businesses with up to 100 employees, although states may limit the small employer definition to no more than 50 employees until 2016. And the health insurance premium credits kick in, which means the federal government begins subsidizing the purchase of health insurance for individuals with incomes up to 400 percent of the federal poverty level.
The individual mandate tax penalty begins at $95 or 1 percent of household income, whichever is greater.
The employer mandate penalties are based on the number of full-time employees during the preceding calendar year; whether the firm offers coverage to full-time employees; whether coverage is "affordable" and meets "minimum value;" and whether one or more full-time employees qualify for a government subsidy. A full-time employee qualifies for a subsidy if his or her household income is between 138 and 400 percent of the federal poverty level and the employee’s share of the self-only portion of the premium exceeds 9.5 percent of their income.
NFIB has created a guide to PPACA that you can access on NFIB.com. The guide provides a timeline on when certain taxes will occur and detailed information on how the law will affect small business owners. View the Healthcare Playbook.
Updated January 7, 2013