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Myth vs. Fact- Myth #1: All Businesses Will Be Required to Provide Health Insurance to All of Their Employees

by Meredith K. Olafson, Community Moderator

  • Created: February 20, 2013, 4:00 pm
  • Updated: February 20, 2013, 4:00 pm
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38 comments

As a business owner, it’s important to understand how the Affordable Care Act can affect your business. However, with so many misconceptions about how the Affordable Care Act works, this can be difficult.  To clarify the myths versus facts, we’re launching a new blog series called “Myth vs. Fact: The Affordable Care Act and Small Business”.

This blog covers one of the most common myths we’ve seen out there: All businesses will be required to provide health insurance to all of their employees.

Fact: Employers are not required to provide coverage to their employees under the Affordable Care Act.  However, starting in 2014, some businesses that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law.

How do I know if I may be subject to an Employer Shared Responsibility Payment?

Businesses with 50 or more full-time or full-time equivalent (FTE) employees that do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees (and dependent children under the age of 26 starting in 2015) may be subject to a shared responsibility payment if at least one of their full-time employees receives a premium tax credit in an Affordable Insurance Exchange, or Marketplace.   For the purposes of these provisions, a full-time employee is one who is employed an average of at least 30 hours per week.

Businesses will not be affected by these provisions if they already offer affordable health coverage that provides a minimum level of coverage to their full-time employees, which is the vast majority of these businesses.

Businesses with fewer than 50 full-time or FTE employees are generally not affected by these provisions.  However, it’s important to know that if companies have a common owner or are otherwise related, their total combined number of employees is used to determine whether each separate company is subject to these provisions — even if none of the member companies individually employ 50 or more full-time or FTE employees.

How can I find out if I meet the threshold number of 50 or more full-time or FTE employees?

To assist employers, the IRS has developed a helpful set of Q&As on the Employer Shared Responsibility provisions. The IRS has also issued a set of proposed rules relating to the Employer Shared Responsibility provisions, and is accepting written or electronic comments by or before March 18, 2013.  

About the Author

Meredith K. Olafson is Senior Policy Advisor for the U.S. Small Business Administration where she oversees the agency's education and outreach efforts around health care and the Affordable Care Act.
Tags: Community Blogs, Health Care Business Pulse, SBA News and Views

Comments

dean@owencpa.com | Window Shopper | 2/24/2013 - 4:52 pm

Show Replied Text…
It states you are not affected if you provide affordable healthcare. I do not think this is accurate. I think you must offered And you must have all but 30 take it or you are subject to the penalty. There are employees that elect to waive coverage even if they are offered affordable coverage. If I as an employer offer all the government says I must to avoid the penalty, and employees waive off, am I still subject yo the penalty? Can the author respond? I hope she is correct but I don't think so.
You have no control over the penalty, if an employee signs up for the
exchange, you pay. Its that simple.

TheMeridianGroup | Window Shopper | 2/24/2013 - 8:32 pm

Show Replied Text…
You have no control over the penalty, if an employee signs up for the exchange, you pay. Its that simple.
Actually that is not correct. If you offer the required coverage AND the
share of the employees single premium is not more than 9.5% of their W2
income (two other tests available as well) than you are not subject to the
penalty if the employee goes to the exchange.

IE | Window Shopper | 2/24/2013 - 10:34 am

"Employers are not required to provide coverage to their employees under the
Affordable Care Act. However, starting in 2014, some businesses that do not
offer health coverage to their full-time employees may be subject to a shared
responsibility payment under the health care law." Since the cost of health
care is so high, as a new start-up that would like to provide health
insurance to my employees in future, I wonder if the efficiencies Obamacare
claims will reduce wastes in the healthcare system will be enough to offset
our healthcare costs to an affordable level.
www.inspiredturkey.com "Delectable Pressure Fried Turkeys! At Inspired Turkey, every day is Thanksgiving!"

dean@owencpa.com | Window Shopper | 2/24/2013 - 4:53 pm

Show Replied Text…
"Employers are not required to provide coverage to their employees under the Affordable Care Act. However, starting in 2014, some businesses that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law." Since the cost of health care is so high, as a new start-up that would like to provide health insurance to my employees in future, I wonder if the efficiencies Obamacare claims will reduce wastes in the healthcare system will be enough to offset our healthcare costs to an affordable level.
Has government ever reduced the cost of anything? If they can reduce the cost
of goods and services how about we start with fuel prices?

Ropergroup | Window Shopper | 2/24/2013 - 8:20 am

As a true small business owner (I have less than 10 employees), I would love
to be able to provide health care coverage for my employees. I care about
their well-being. When they (and their families) are healthy, they can be
more focused on providing services to our clients. However, the cost is so
high, there is no way a small business can afford to do that and stay in
business. Health care costs have gotten out of hand. Hospitals and doctors
charging 10 - 20 times their costs (and insurance companies reimbursing them
at that rate), insurance fraud, and non profit insurance companies making
billions of dollars profit are the real issues. If these issues could get
resolved, we wouldn't need a mandate to provide coverage -regardless of the
number of full-time equivalent employees a business has.
Professional Web Site: Roper Bookkeeping

drdelurk | Window Shopper | 2/24/2013 - 6:35 pm

Show Replied Text…
As a true small business owner (I have less than 10 employees), I would love to be able to provide health care coverage for my employees. I care about their well-being. When they (and their families) are healthy, they can be more focused on providing services to our clients. However, the cost is so high, there is no way a small business can afford to do that and stay in business. Health care costs have gotten out of hand. Hospitals and doctors charging 10 - 20 times their costs (and insurance companies reimbursing them at that rate), insurance fraud, and non profit insurance companies making billions of dollars profit are the real issues. If these issues could get resolved, we wouldn't need a mandate to provide coverage -regardless of the number of full-time equivalent employees a business has.
How hard is to understand that nationalized healthcare is a direct subsidy to
small businesses? Unfortunately, by fighting Obama and not offering a
pro-small business proposal, we lost!

We had a chance to create a private-market system based on competition funded
by the government coupled with an individual co-payment system to control
abuse.

Best of ALL worlds... Large pool to spread costs, competition among
healthcare providers to provide better less expensive care, elimination of
the leeches (insurance companies), consumer participation reducing waste,
near 100% coverage ... and most importantly - disconnecting the idea that
employers are somehow required to provide basic health benefits.

But, no!! - too many people are idealogically fighting smart business!

Fred Taxmanno | Window Shopper | 2/20/2013 - 6:45 pm

All the 50 employee requirement does is encourage businesses to keep the
number of employees under 50 and not to hire full-time employees in order to
skirt the law. Some of the consequences of this law.
Professional Web Site: Tax Relief ASAP

andovercg | Window Shopper | 2/24/2013 - 9:21 am

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All the 50 employee requirement does is encourage businesses to keep the number of employees under 50 and not to hire full-time employees in order to skirt the law. Some of the consequences of this law.
Fred,

You have hit it spot on. The future of small business is for a funding person
or organization to keep business entities below 50 people. If one gets above
40, the mission will be to create a separate business entity that has favored
trade status with the first.

You will likely also see firms splitting up to avoid Obamacare.

There is no way other to do this. There was a great article in Investors
Business Daily last week that stated it in black and white: "Will Only
Suckers Buy ObamaCare Insurance?" Its a quick summary of how Obamacare will
fail based on its own economics.

Mike
Professional Web Site: Andover Networks