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Preparing Your Business for 2015 ACA Deadlines

Companies should approach the Affordable Care Act with caution and thought.

 

Key Takeaways
  • Following a one-year delay in enforcement and the implementation of a transition period intended to ease employers into understanding and complying with the Affordable Care Act (ACA), the so-called employer mandate became law on January 1, 2015.

  • Despite the fact that surveys show that employers appear to be more aware of their requirements, a recent study by the Transamerica Center for Health Studies found that almost one third reported being less than satisfied with their level of knowledge about the law.

  • Companies with over 100 full-time employees and/or full-time-equivalent workers (defined as those who work an average of 30 or more hours per week) now are required to offer health care coverage to their employees who qualify.

  • For companies with between 50 and 99 full-time employees, the delay in the implementation of the employer mandate is not automatic; employers must meet certain conditions under the so-called transition rules to be eligible.

  • Alternatively, companies with 25 or fewer full-time employees and whose employees meet certain wage thresholds may be eligible for certain employer incentives and tax credits.

ACA HealthCare

With many companies being impacted by the recent ACA employer mandates, being aware of the policies and implementation timing is key.

“Health care cost is a top concern of middle market firms, especially as ACA mandates come to fruition.  However, with the transitional periods for the employer mandate ending, ACA deadlines are now clear and businesses of any size cannot risk ignoring the coming changes and reporting requirements,” says Jeffrey Englander, GE Capital’s Senior Research Analyst for the healthcare industry.

Here’s a recap of the key 2015 ACA deadlines:

Beginning Nov. 15, 2014
Change: Small employers can now apply and determine eligibility online for healthcare coverage via the government sponsored Small Business Health Options (SHOP) online insurance exchanges (unlike 2014 when eligibility could only be determined and applications accepted via paper hardcopy only).

Beginning: January 1, 2015
Change: 2015 will mark the last year that employers with an average of between 50 and 99 full-time employees will be exempt from the ACA’s employer mandate penalties under 2015 transitional rules. However, employers with an average of between 50 and 99 full-time employees may have certain reporting requirements under the law and must make sure they know what reporting requirements apply to them in 2015, if any.

Beginning Jan. 1, 2016
Change: The ACA’s transitional rules for small and midsize employers expire and the employer healthcare mandate will apply to all employers with an average of 50 or more full-time employees. Forward-thinking small and midsize employers should begin planning for 2016 during the transitional period afforded to them in 2015.

The employer mandate requirement of the ACA finally begins to take effect over a two-year period beginning in 2015, depending on the employer's size. While some employers may be exempt from providing coverage in 2015, they may still have certain reporting requirements and must make sure that they qualify for exemption. Moreover, smaller employers with 25 or fewer full-time employees may qualify for certain types of subsidized coverage that went into effect in 2014 and should not wait to investigate these incentives due to these other deadlines.

 
What Is an “Applicable Large Employer”?
Under the ACA, so-called "applicable large employers" must provide health insurance coverage to their employees in 2015 or face a penalty. So, what is an "applicable large employer"? Determining whether you are one and therefore subject to the penalties is a two-step process.
 
First, for purposes of the law in 2015 only, an applicable large employer has 100 or more full-time employees and/or full-time-equivalent workers. Full-time employees are defined as those who work an average of 30 or more hours per week. The hours of all variable-hour employees are added up to get a total number of full-time-equivalent workers, which is then added to the number of full-time employees. If this total number of full-time and full-time-equivalent workers is over 100, the employer is an applicable large employer and subject to the employer mandate.
 
Any penalties under the law are assessed based solely on the number of full-time employees; full-time-equivalent workers are not counted. This can get complicated quickly, which is why we suggest that employers prepare early and consult appropriate legal and financial advisers as needed.
 
Larger Companies Face the Mandate in 2015
Applicable large employers must either offer health care coverage that meets the minimum benefits defined by the ACA or face a penalty. Under the law, employers could potentially face a penalty in two ways:
 
If an applicable large employer does not offer coverage at all, it will face a $2,000 penalty per full-time employee, exempting the first 80 employees. In addition, employers who offer coverage but fail to meet the ACA's "affordability" or "minimum value" requirements could also be subject to a $3,000 fine per full-time employee, with no exemptions.
 
If an employer offers coverage that doesn't meet the ACA coverage requirements, penalties are capped at the maximum that an employer would pay for not offering coverage. Therefore, an employer will never pay more for offering insufficient coverage than it would for not offering coverage at all.
Both types of penalties are triggered when at least one employee receives subsidized coverage in a state or federal insurance marketplace.
 
Midsize Companies Should Begin Planning for 2016
For 2015 only, employers with between 50 and 99 full-time employees (as defined above) are exempt from the ACA's employer mandate penalties under so-called transitional rules, which ease the compliance burden for small and midsize companies. However, this relief is not automatic; employers must meet a number of conditions to qualify.
 
While employers should consult their advisers, the two most important conditions are: 1) employers cannot reduce the hours or size of their workforce without a bona fide business reason; and 2) they cannot reduce or eliminate any health insurance coverage that was in effect as of February 9, 2014 (the date these transition rules went into effect).
Beginning January 1, 2016, the employer mandate applies to all employers with an average of 50 or more full-time employees. As a result, midsize employers should review their individual situations and begin preparing for 2016.
 
Smaller Employers Must Ensure They're Not Losing Incentives
While the employer mandate will begin to apply to certain large and midsize employers in 2015 and 2016, respectively, smaller employers may be eligible for certain tax credits that began in 2014. For example, employers of 25 or fewer full-time employees whose employees have average annual wages of $50,000 or less and who pay at least 50 percent of their employees' premiums qualify for a tax credit. This tax credit is equal to 50 percent of the employer's contributions to employee premiums (for for-profit employers), as long as employees are enrolled in a qualified health plan offered in the Small Business Health Options Program (SHOP) Marketplace.
 
While certain employers will be eligible for the credit's full amount, this credit is phased out for employers with between 10 and 25 full-time employees with average annual wages of $25K to $50K. Given the availability of these credits, small employers should explore their eligibility to help defray costs.
 
Smaller Employers Must Be Aware of Special Coverage Considerations
Although smaller employers may want to offer coverage, there are several special considerations that they need to be aware of. The first is that, even after all transition rules are implemented, employers of 50 or fewer full-time employees are not required to offer coverage.
 
Small employers should also consider factors such as the average annual wages of their full-time employees, employees' marital and family statuses, and the nature of the potential coverage. Under certain circumstances, employees may in fact be eligible for coverage subsidies on an exchange that they would lose if their employer offered qualifying coverage. In these situations, employees may be able to obtain better coverage at lower cost on an exchange.
 
Know What You Have to Do to Stay Compliant
There is a complex chain of decisions and conditions that affects companies' choices surrounding health care coverage and whether they are ACA-compliant. Understanding exactly whom employers must cover and why they become subject to the employer mandate isn't always clear. As such, it is important that employers consult appropriate advisers to make sure that they understand which provisions of the ACA apply to them.
 

This publication provides general information and should not be used or taken as business, financial, tax, accounting, legal or other advice, or relied upon in substitution for the exercise of your independent judgment. For your specific situation or where otherwise required, expert advice should be sought. The views expressed in these articles reflect those of the authors and contributors and not necessarily the views of GE Capital or any of its affiliates (together, "GE"), and should not be deemed as a recommendation to purchase or sell any securities or investments mentioned. Although GE believes that the information contained in this publication has been obtained from and is based upon sources GE believes to be reliable, GE does not guarantee its accuracy and it may be incomplete or condensed. GE makes no representation or warranties of any kind whatsoever in respect of such information. GE accepts no liability of any kind for loss arising from the use of the material presented in this publication.