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

After a lot of debate and a host of activities at the last minute, the United States can now boast of a law that promises health care for all and sundry. Earning praise and criticism at the same time, the Patient Protection and Affordable Care Act indicates that there would be huge changes for 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 especially for employers who have to make changes in their policy, especially as far as health insurance is concerned. As per the new law, will they be penalized for not providing health insurance to their employees?

Insurance Exchanges

Starting from the year 2014, every individual, as well as small businesses, has a right to health insurance through insurance exchanges that are run by the state. The insurance companies will have to compete with each other and owing 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 to 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 that have an employee strength of around 100 can benefit from the small business health options. Starting in the year 2017, businesses that increase their employee strength beyond 100 are also liable to benefit from SHOP.

Are Employers Bound to Offer Health Insurance to Employees?

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

Employers who have over 200 employees working under them need to include new employees into the company’s healthcare plan. Employers 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. If employers, with an employee strength of more than 50, fail to provide health insurance, 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. Employers, with over 50 employees working for them, must pay a fine in case 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 of a subsidy. The other option that an employer has 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 the year 2010, business houses that have an employee strength of 25 and offer annual wages up to $40,000, might have the eligibility to avail a tax credit of up to 35%, in situations when they pay for at least half of the health insurance costs of the employees. From 2014, small businesses buying health insurance policies for the employees via SHOP, are eligible for a small business tax credit of 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 a yearly salary of $20,000 or less, can avail 35% credit over a time period from 2010 to 2013. From 2014, they are eligible for a tax credit of 50%.

The Health Care and Education Reconciliation Act is supposed to make several technical changes to the Patient Protection and Affordable Care Act that received approval from the Senate.

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