ObamaCare – The ACA Employer Mandate
May 9, 2013
EMPLOY FIFTY (50) or more full-time employees? If so, you or your company will be delighted to know that the employer mandate provisions of the Affordable Care Act (“ACA”) will impact your business in January, 2014. In fact, deadlines under certain provisions of the ACA have already passed. Fortunately, the Federal Agencies in charge of issuing rules and guidance under the ACA have postponed some effective dates as those agencies struggle with the complexities of the ACA.
Employers with less than fifty (50) full-time employees are not required to meet the ACA mandate. However, there are provisions of the ACA in effect that provide tax credits to employers with less than twenty-five (25) full-time employees. There are also certain ACA provisions, such as mandatory employee enrollment that will apply to employers of more than two hundred (200) full-time employees.
Determining who is a full-time employee is not simple. Generally a full-time person is one who regularly provides at least thirty (30) hours on average per week. That is easy and might even provide a way around the fifty (50) employee rule and mandate by allowing an employer to hire part-time employees. That won’t work. The ACA requires that an employer add up all hours of part-time employees in a month and divide that number by 120. The quotient (the result of the division) is then added to the total number of full-time employees to determine if the fifty (50) employee rule applies. While an employer does not have to provide coverage for part-time employees, those very employees may be used to trigger the insurance mandate for an employer with less than fifty (50) full-timers.
Hours worked during a month must include all compensable hours such as paid sick leave and paid vacation. There are proposals to deal with seasonal employees and new employees. The rules for these employees have not been finalized.
It Gets Better
The employer has more than fifty (50) full-time employees. So what. This is what. The employer must offer health insurance which is minimum essential coverage” to full-timers and their dependents or the employer might pay a tax (“penalty”) of Two Thousand Dollars ($2,000.00) annually for each employee in excess of thirty (30) employees. Minimum essential coverage including coverage under an eligible employer-sponsored plan is a grandfathered plan, i.e., a plan which was in effect on March 23, 2010 and had at least one (1) person enrolled. Note that the tax will only apply if at least one full-time employee enrolls in a health plan offered by an Exchange and that employee must also qualify for an insurance premium credit or cost-sharing subsidy. Since an employee must have a household income less than four hundred percent (400%) of the federal poverty line to qualify for a credit or subsidy, it is possible to avoid the penalty (tax) and not provide the insurance coverage.
Coverage must be both “affordable” and provide “minimum value”. These terms come into play if a full-time employee qualifies for a credit or subsidy. The analysis would be: (a) is the employer a “large employer” (the 50 full-time employee test); (b) are any of the employees eligible for an insurance premium credit or cost-sharing subsidy; (c) if so, is the employer’s coverage “affordable” and does it provide “minimum value”; (d) if not, and a full-time employee enrolls in a qualified plan through an Exchange and receives a credit or subsidy, the employer is subject to the “tax”. Remember, the employer only pays the “tax” on those full-time employees in excess of thirty (30). The “tax” does not apply to those part-time employees who are eligible to participate in the employer’s plan but opt to obtain coverage through an Exchange.
The ACA requires all states to establish and operate Exchanges where individuals and small businesses can purchase health insurance coverage. Alternatively, states can decide not to establish an Exchange. In that case, the federal government must establish and operate an Exchange for that state. On March 13, 2013, Session Law 2013-5 was ratified by the North Carolina legislature. The bill essentially constitutes an opt out of a state run exchange by North Carolina. The only Exchange that will be set up will be a federally run Exchange. This may well impact the potential liability of large employers for the “tax” under the ACA. The triggering event is a full-time employee enrolling in an Exchange plan and receiving the credit or subsidy. However, the language of the ACA arguably requires the employee to obtain the credit on the subsidy from an Exchange established by a state not the federal government. Large employers should not rely on the Exchange set up in North Carolina in determining the potential application of the “tax”. That issue will need to be resolved by the courts on a clarifying amendment to the applicable statute.
The ACA requires that large employers notify new employees with a notice of health insurance coverage options which will include information of Exchange coverage, the potential for the employee to be eligible for a premium tax credit and that if the employee enrolls in an Exchange plan, that any monetary contributions by the employer toward premium payments under the employer’s plan will be lost. The ACA required the Notice to be provided to current employees no later than March 1, 2013. Don’t worry, the U.S. Department of Labor had postponed the effective date of the Notice.
We strongly suggest that any employer potentially subject to the requirements of the ACA get professional help. White & Allen, P.A. will be glad to assist you.
This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney. If you have questions concerning this article, please contact John C. Archie at firstname.lastname@example.org.