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- Large employers have 100 or more employees; they must cover 70 percent of their FTE employees in 2015 and 95 percent in 2016
- Employers with fifty or more full-time equivalent employees must offer qualified health insurance after January 1, 2015
- Medium-sized employers have 50 to 99 employees; they must offer insurance to their full-time equivalent employees and dependents ages 25 or younger
- Small business employers employee 49 or fewer FTE employees; they have no obligation to offer health insurance to employees
- Employers that have fifty or more employees that do not provide qualified health care coverage face the Employer Shared Responsibility Payment
- Employers with fifty to 99 employees can meet their obligation under the employer mandate by offering qualified, affordable health insurance to their employees
When selecting employer-sponsored insurance plans, employees can benefit from comparison shopping to identify the features of greatest importance. The minimum value of the plans must exceed sixty percent insurance paid benefits.
Comparison shopping can help consumers focus on experience and indications of future healthcare needs. It can help find the best possible fit for their situation.
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The Employer Mandate
The federal government installed the employer mandate over a period of two years, from 2015 through 2016. It applies to employers with fifty or more full-time equivalent employees. The employer mandate requires firms with 100 or more FTE employees to insure at least 70 percent by 2015 and 95 percent by 2016.
Smaller businesses with fifty to ninety-nine employees must offer insurance to FTE workers by 2016. The ACA does not require insurance from employers with 49 or fewer employees. They can participate in programs for coverage that provide tax incentives and credits.
Defining a Full-time Employee
The ACA defines full-time employees as full-time equivalents; they include full-time or part-time employees that average thirty hours or more per week. A full- time employee as a full-time equivalent; one that averages thirty hours per week over the preceding one-year period.
The employer mandate requires employers to offer qualified health insurance coverage to their full-time and full-time equivalent employees. The mandate applies a tax penalty called the employer shared responsibility payment. Employers must pay the employer shared responsibility penalty when any of the below-listed statements apply to them.
- It is an employer of fifty or more FTE employees that does not provide health insurance coverage,
- It is an employer of fifty or more FTE employees that does not provide minimum value health insurance coverage,
- It is an employer of fifty or more FTE employees that does not provide affordable coverage.
Overall Impact on Employers
The law divides employers into three groups. The groupings are those with 49 or fewer employees, those with 50 to 99 employees, and those with 100 or more employees.
– Employers with fifty to 99 employees must offer health insurance to their full-time equivalent employees and their dependents under age 26.
– Large employers with 100 or more full-time equivalent employees must insure seventy percent of their FTE equivalent employees by 2015 and 95 percent by 2016.
– Employers with 49 or fewer employees do not have to offer health insurance. They can participate in programs that offer insurance and that provide tax credits for the employer. Eligible firms must pay no more than a $50,000 average per year in wages; the greater tax credits and incentives go to firms with 25 or fewer employees.
Types of Policies
The Affordable Care Act offers four types of health insurance. Based on the actuarial value, the law groups them by metallic bands. The policies are grouped on the basis of the amount of insurance paid benefits. Comparison shopping permits further analysis. Consumers can focus on the parts of the prices of greatest concern to them.
The below-listed items describe the four metallic bands.
- Platinum plans pay about ninety percent of benefits and leave only about ten percent for the consumer. They have high premiums, low out-of-pocket costs, and low deductibles.
- Gold plans pay about eighty percent of benefits. They have high premiums and lower out-of- pocket costs than silver and bronze plans. They offer low deductibles.
- Silver plans cover about seventy percent of benefits with insurance funds and thirty percent from the consumer. Some silver plans work with health savings accounts to provide flexibility and long-term financial strength
- Bronze plans pay about sixty percent of the insurance benefits and leave the balance of forty percent to the consumer. Bronze plans have low premiums, and bronze plans have the minimum level of value needed to pass the individual and the employer mandate.
Metallic bands group plans of similar value of insurance covered benefits. Comparison shopping helps consumers determine the best value for their family or individual health care needs.
Under the ACA, employers must offer affordable insurance; employees are not required to accept every offer. They can reject policies that cost too much and those that do not provide minimum value. The rules define minimum values as sixty-percent of benefits paid by insurance.
To be affordable, employer-sponsored insurance must cost 9.6 percent of the annual household income or less. In either case, the employee may get insurance on the state or federal exchange and the rules will charge the employer a shared responsibility penalty.
Determining the Minimum Value
The test of minimum value is in the amount of insurance paid services. The rules require an average of insurance payment for sixty percent of costs. COBRA benefits meet the standard for minimum essential coverage as do Medicaid and Medicare.
Employer Coverage under the ACA
For the calendar year 2016, the ACA permits large employers who have exceeded 70 percent participation to deduct the first 30 FTE employees from the health insurance requirement. In 2016, employers with 50 to 99 employees must offer health insurance to full-time equivalent employees and their dependents. Spouses of employees are not considered dependents and do not require coverage by the employer.
Determining FTE Employees
Employers should determine the number of FTE employees that they must offer insurance coverage. The calculation can be difficult particularly in cases of irregular or seasonal employment. The IRS can assist; the marketplace and state exchanges will provide notice of employees that get tax credits and subsidized coverage.
Thirty Hours Per Week
The rules state that employees that work thirty hours per week are full-time equivalent workers. Employers that seek to avoid or reduce the number of employees often use 29 hours per week as a cutoff. This is entirely a company decision; the law does not require limiting employee hours.
- The hourly rule is neutral, and simply rates employees as full-time or part-time based on the hours worked.
- 130 hours in one calendar month
- The IRS performs a case-by-case analysis; volunteer work or other unpaid service does not count towards the FTE determination
The ACA requires penalties when employees that were offered health insurance decline and select subsidized plans on the federal or state marketplaces.
The penalty for firms that do not cover all employees or offer insurance at all will pay up to $3,000 for each FTE employee. The IRS applies the penalty on the basis of 1/12th per month.
Employers that decide not to offer any health insurance face a penalty flat fee amount of $2,000 per full-time equivalent employee.
The overall limit caps the fee; it will not exceed $3,000 per employee.
If you want to find your own health insurance, check out free private health insurance quotes with our comparison tool!
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