A New Delay in the Play or Pay Rules
The federal government announced a delay in the "Play or Pay" provision of the Patient Protection and Affordable Care Act. This provision will require businesses to offer health care plans to their full-time employees or face costly penalties, depending on how many full-time employees they have. Don't wait until this mandate takes effect. Now is the time to discover what impacts this provision will have on your business and prepare for the coming change instead of delaying these difficult decisions. The more prepared you are, the more time and money you'll save down the road.
How the Size of Your Business Will Determine Coverage Requirements
Whether a business is required to offer health coverage is dependent on the number of full-time employees. The definition of a full-time employee is that they work at least an average of 30 hours per week. For 2015, an employer can choose any consecutive period of at least six months during 2014 to determine how many full-time employees they have. However, in 2016, an employer must average the total number of full-time employees for each of the 12 months in 2015 to determine their company's status and what impacts "Play or Pay" will have on them. Here are the impacts, depending on your company's size and the number of full-time employees:
- Employers with 50 or fewer full-time employees are not required to offer coverage, but are still required to notify their employees about state exchanges.
- Employers with more than 50 employees, must offer coverage to a minimum of 70% of full-time employees in 2015 and a minimum of 95% in 2016. This rise in percentage will certainly impact your business, so make sure you are planning ahead now.
- For employers with a mix of full-time, part-time, seasonal or variable-time employees hovering near the 50-employee mark, this delay gives you time to discover if you are required to offer coverage. Take advantage of this opportunity to put systems in place to track employee hours and determine what will be required of you in 2016.
Once you determine how many full-time employees you have and you know that you will have to provide coverage, the health plan you offer will also have to meet affordability and minimum value standards. Keep these rules in mind when determining coverage plans:
- The rule for affordability is that the employee’s share of the premium for self-coverage must not be more than 9.5% of an employee’s annual household income.
- The rule for minimum value is that a plan must cover at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.
Penalties and Financial Impacts
Every business, no matter what size, will have to follow the Employer Information Reporting Guidelines and complete paperwork. The final regulations were issued on March 10th and many people anticipate that compliance with reporting requirements will be a daunting task for businesses of any size. Here are the specifics, depending on company size:
- Employers with less than 50 employees do not have to provide coverage, but can receive tax credits if they offer it.
- Employers with more than 50 employees who decide to "pay" instead of offering health coverage are subject to a penalty calculated by subtracting 30 from the total number of full-time employees and multiplying that by $2,000. Example: (65 employees - 30) x 2,000 = $70,000 penalty.
- If employers with more than 100 employees, offer insufficient coverage or if they fail to cover an eligible employee, they are subject to a $3,000 per "incident" penalty.
To understand full calculation information and to learn how this rule applies to your company, you can contact our office to speak with an expert.
We are here to help!
Ask yourself these questions to help guide you in your decision-making process: How does offering health insurance affect your employee satisfaction and retention? What is the impact on your bottom line? What are your industry peers doing? As with most new compliance laws, the details are complicated. Contact us soon and let us help you prepare for the inevitable changes so that your company can confidently navigate through this transition.