Will You Be Penalized For Not Providing Health Insurance To Your Employees?

After many debates and activities, the United States can now boast of a law that promises health care for all. Earning praise and criticism simultaneously, the Patient Protection and Affordable Care Act indicates that there would be huge changes for everyone. This includes the insurers, healthcare providers, drug manufacturers, small businesses, employees, large employers, and even the uninsured.

All in all, the new law would cater to everyone. Going through the 2400 pages of the new act and figuring things out can be cumbersome. This is all the more true for employers who have to change their policies with regard to health insurance. According to the new law, employers will face a penalty for not providing health insurance to their employees.

Insurance Exchanges

Starting from 2014, every individual and small business has a right to health insurance through insurance exchanges run by the state. The insurance companies will have to compete with each other. Due to this competition, small businesses and individuals can lay their hands on a health insurance policy at a cheaper rate. SHOP or Small Business Health Options Program happens to be an exchange program for small businesses.

This program helps small business houses group together to accentuate their purchasing capacity. With the help of this, small business houses would be able to provide health insurance to the employees. The rates would be more or less similar to those of large business houses. Small businesses with an employee strength of around 100 can benefit from the small business health options. Starting in 2017, businesses that increase their employee strength beyond 100 can benefit from SHOP.

Are Employers Bound to Offer Health Insurance to Employees?

Businesses with an employee strength of less than 50 do not necessarily offer health insurance. However, small businesses might participate in a SHOP exchange and offer their employees a health insurance policy at a much reasonable rate. Large corporations must offer health insurance to their employees, failing which they would have to pay penalties. However, that depends on the employee strength and the kind of coverage they offer.

Employers with over 200 employees need to include new employees in their healthcare plans. They need to furnish notice of an employee’s right to exclude themselves from automatic enrolment. Employers must inform the employees whenever an insurance exchange is available.

Suppose the employers fail to provide health insurance with an employee strength of more than 50. They would have to shell out a penalty amount of $2000 per employee even if one employee chooses to get health insurance via an exchange.

The first 30 employees are not usually included in the calculation. For instance, an employer with an employee strength of 75 would need to shell out a penalty amount for 45 employees. Therefore, the total penalty comes to around $2000 x 45 = $90,000. With over 50 employees working for them, employers must pay a fine if an employee has to avail of a subsidy to pay for the insurance policy. The amount is $3000 for every employee who has chosen to avail a subsidy. The other option is to pay $750 per employee working. They can opt for whichever amount is less.

Can Small Business Houses Get Help While Providing Insurance to the Employees?

From 2010, business houses with an employee strength of 25 and offer annual wages up to $40,000 might be eligible to avail a tax credit of up to 35%. However, this is when they pay for at least half of the employees’ health insurance costs. Since 2014, small businesses buying health insurance policies for the employees via SHOP are eligible for a small business tax credit. And that is around half of the amount needed for the premiums.

Is There Any Special Rule that Covers Employers with an Employee Strength of 10 or Less?

Small businesses can avail tax credits depending on the employee strength and average yearly salary. Businesses that have an employee strength of 10 or less and offer an annual salary of $20,000 or less can avail 35% credit over some time from 2010 to 2013. From 2014, they are eligible for a tax credit of 50%.

The Health Care and Education Reconciliation Act will make several technical changes to the Patient Protection and Affordable Care Act. And it now has the Senate’s approval. Let’s hope there is some good news in the future. That way, we can be sure that everyone receives health insurance cover.