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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

TheMeridianGroup | Window Shopper | 2/26/2013 - 1:54 am

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It appears you would be subject to the requirement to offer coverage or pay the penalties. Given the wage level of your employees many would likely use an exchange to get coverage which would activate the penalties. If turnover is a problem for you, offering coverage to your full time workers (30+ hours a week) with a six month wait period from eligibility (which you could do) may help stabalize turnover. It may also entice more of your workers to full time employment which means more expense in health coverage. The issue will be the level of coverage you provide and how much you ask your employees to contribute to it. If you ask the employee to contribute to the coverage you must keep the contribution at or below 9.5% of the annual wage of the worker in order to avoid facing the tax penalty. Until the insurers finalize the new plans and pricing it will be difficult to evaluate the additional cost to your business.
The maximum waiting period starting 2014 will be 90 days. Also, just to be
clear, the 9.5% has to be measured against the W-2, with two other "safe
harbors" available.

syujengchyang | Window Shopper | 2/24/2013 - 3:48 pm

The Affordable Healthcare Act is just a small legal step to make eventually
healthcare a human right. A "small legal step" is the operative words.
Professional Web Site: PhD Researcher

49th Street Bail Bonds | Window Shopper | 2/24/2013 - 11:30 pm

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The Affordable Healthcare Act is just a small legal step to make eventually healthcare a human right. A "small legal step" is the operative words.
I think it is a big step in the right direction. Let's wait until the Affordable Healthcare Act is completely in place and see if/what are any unexpected consequences before we trash this act. This post was edited to remove a link. Please review our Community Best Practices (http://www.sba.gov/community) for more information about how best to participate in our online discussions. Thank you.
Joe Von Waldner 49th Street Bail Bonds Phone: 727-592-0000 www.49thstreetbailbonds.com
Professional Web Site: 49th Street Bail Bonds

TheMeridianGroup | Window Shopper | 2/24/2013 - 2:11 pm

She is right that you do not have to offer insurance if you have less than 50
FT or FTEs. But, if you have 50+ and you DON'T offer insurance you would pay
$2,000 x number of employees minus 30. So if you have 60 FT employees you
would pay $2,000 times 30 OR $60,000 and it is NOT tax-deductible. For those
of you have a small business under 25 employees there is a tax credit but it
is on a sliding scale where once you exceed 10 employees it gets smaller and
smaller.

Finally on splitting a company into two entities, it will not work as you
would have to count both companies together, assuming same or similar
ownershp (rules are complicated).

ajaygoyal01 | Window Shopper | 2/24/2013 - 2:07 pm

I have a company, which employs 30 employees at one location and 20 employees
at other location. Will the affordable health care act provision will apply
to me ? Can I create separate companies for each location to avoid the
Affordable health care act provision starting January 1, 2014 ? I would
appreciate your response.

kmurray | Community Moderator | 3/1/2013 - 6:24 am

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I have a company, which employs 30 employees at one location and 20 employees at other location. Will the affordable health care act provision will apply to me ? Can I create separate companies for each location to avoid the Affordable health care act provision starting January 1, 2014 ? I would appreciate your response.
Hello, and thank you for your reading our Health Care Blog. For more information regarding your questions, we refer you to IRS’s Questions and Answers on Employer Shared Responsibility at http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared... under the section titled “Which Employers are Subject to the Employer Shared Responsibility Provisions?” Question 4 addresses which employers are large enough to be subject to these rules, and Question 5 provides guidance to businesses that have a common owner or are otherwise related. Generally, businesses will need to count the total number of employees they employ during 2013, including full-time, part-time, and seasonal workers, to determine whether they are considered large enough to be subject to these new provisions in 2014.

atmaninsurance | Window Shopper | 2/25/2013 - 12:42 pm

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I have a company, which employs 30 employees at one location and 20 employees at other location. Will the affordable health care act provision will apply to me ? Can I create separate companies for each location to avoid the Affordable health care act provision starting January 1, 2014 ? I would appreciate your response.
You would have to divest ownership of the second company. The IRS will look
at all of your companies together to determine number of employees. Since you
are so close to the 50 mark, you could reduce some employees to part time to
keep below the threshold. You also have options to share the cost of coverage
with your employees to lower your costs. Depending on how much you pay your
employees you could also look at tax advantaging their purchase of individual
coverage outside an exchange.

dean@owencpa.com | Window Shopper | 2/24/2013 - 4:51 pm

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I have a company, which employs 30 employees at one location and 20 employees at other location. Will the affordable health care act provision will apply to me ? Can I create separate companies for each location to avoid the Affordable health care act provision starting January 1, 2014 ? I would appreciate your response.
Fire some employees. It is your only change of staying out of the mess.

MikeB2141 | Window Shopper | 2/24/2013 - 12:00 pm

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.

kmurray | Community Moderator | 3/1/2013 - 6:25 am

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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.
Hello, and thank you for your question. Under the Employer Shared Responsibility rules, an employer must first determine whether it is large enough to be covered by these rules beginning in 2014. Assuming it is, the employer generally will be liable for an Employer Shared Responsibility payment only if it does not make an offer of affordable health insurance that provides a minimum level of coverage to its full-time employees (and their dependents), and at least one of its full-time employees receives a premium tax credit to purchase coverage in a Marketplace. If an employer offers a full-time employee an effective opportunity to enroll in coverage that is affordable to that employee and provides minimum value at least once during the plan year, and he/she declines to enroll, there is no liability for that employee. For more information on how to determine if the coverage you offer to your full-time employees is affordable, refer to Question #11 at http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared....