Affordable Care Act

Breaking News: President Obama to delay the Affordable Care Act requirements for businesses until 2015. Read more

What does the ruling mean?
The delay gives the IRS more time to simplify reporting requirements, as well as for businesses to get up to speed with reporting systems. The government still encourages businesses to voluntarily begin reporting in 2014 so they will be ready for 2015. The delay affects businesses with 50 or more employees.

How does the ruling mean for individuals and businesses with less than 50 employees?
This does not affect businesses with fewer than 50 workers, who were already exempt from that rule. Most large businesses already offer coverage to their employees. The delay also does not change the individual mandate, which requires most Americans to purchase insurance. Some consumers may receive subsidies to help them pay for the insurance depending on their incomes.

Affordable Care Act: Questions and Answers

The Tri-City Regional Chamber of Commerce is committed to serving as the authority on legislative issues, including the Affordable Care Act (ACA). Over the coming months, the Regional Chamber will provide a Question and Answers section on the basics of the ACA in the newsletter and on the Regional Chamber website. The section will focus on what businesses need to know and where and how they can get the best information.

Q: What is the Affordable Care Act?

A: The Affordable Care Act (ACA) was signed into law by President Obama in 2010 to increase health insurance coverage for Americans and reduce the overall costs of health care. Health insurance exchanges are being set up to operate in each state that will offer a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance. Several provisions of the ACA will likely have significant effects on small businesses, their employees, and families. There are different requirements and regulations for businesses between 1 – 50 employees and those with more than 50.

Q: How will people get health care coverage?

A: The ACA will expand health care coverage in the following ways:

  • Individual Mandate - Requires all citizens and legal residents (there are some exceptions to have health coverage in 2014).
  • Small Business Tax Incentives
  • Medicaid Expansion
  • Premium Subsidies
  • Large Employer Mandate

Q: Are there exceptions to the healthcare mandate?

When any of the following apply:

  • Religious objections
  • Undocumented immigrant
  • Incarcerated
  • American Indians and Alaskan Natives
  • Income below the tax filing threshold
  • The lowest cost plan option exceeds 9.5% of an individual’s income

Q: When is the mandate needs set?

A: You are insured for the whole year through a combination of any of the following sources:

  • Medicare
  • The Veteran's health program
  • A plan offered by an employer
  • Medicaid or the Children's Health Insurance Program (CHIP)
  • Insurance bought on your own that is at least at the Bronze level
  • A grandfathered health plan in existence before the health reform law was enacted

Q: How will the levels of coverage differ?

A: The four levels of coverage - bronze, silver, gold and platinum - are based on actuarial value, a measure of the level of financial protection a health insurance policy offers. It indicates the percentage of health costs that a health plan would pay for an average person.

  • Bronze: 60%
  • Silver: 70%
  • Gold: 80%
  • Platinum: 90%

In other words, for a bronze plan, the health plan would cover 60% of the cost for an average population and enrollees (on average) would cover 40%. For a platinum plan, an average individual would pay 10% out of pocket for their covered benefits and the plan would pay 90%. However, individuals with cancer and other high cost health conditions could end up paying significantly more than the average person.

No matter which plan you get, your out-of-pocket spending for the year is capped at $5,950 (if you have an individual plan) or $11,900 (if you have a family plan). Those with lower incomes can get plans with lower spending caps. In other words, you'll be paying the same amount in premiums but spending less in out-of-pocket costs like co-insurance.

Q: What are the employer shared responsibility provisions?

A: Starting in 2014, employers employing at least a certain number of employees (generally 50 full-time employees and full-time equivalents, explained more fully below) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code (added to the Code by the Affordable Care Act). Under these provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees, they may be subject to an Employer Shared Responsibility payment if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges.

To be subject to these Employer Shared Responsibility provisions, an employer must have at least 50 full-time employees or a combination of full-time and part-time employees that is equivalent to at least 50 full-time employees (for example, 100 half-time employees equals 50 full-time employees). As defined by the statute, a full-time employee is an individual employed on average at least 30 hours per week (so half-time would be 15 hours per week).

When do the Employer Shared Responsibility provisions go into effect?

A: The Employer Shared Responsibility provisions generally go into effect on Jan. 1, 2014. Employers will use information about the employees they employ during 2013 to determine whether they employ enough employees to be subject to these new provisions in 2014. See question 4 for more information on determining whether an employer is subject to the Employer Shared Responsibility provisions.

Is more detailed information available about the Employer Shared Responsibility provisions?

Q: Yes. Treasury and the IRS have proposed regulations on the new Employer Shared Responsibility provisions.

Q: As a business owner, what are my requirements?

Large employers with over 50 FTE’s are required to offer a minimum level of health insurance. Companies up to 50 employees are exempt from the mandate. There are also small business Health Insurance Tax credits available. A tax credit is provided to companies with fewer than 25 full time equivalent employees and average annual wages of less than $50,000 that purchase health insurance for employees.

Q: What the eligibility requirements for the Small Business Premium Tax Credit?

  • 2010-2013 maximum credit is 35% for small employers and 25% for small tax-exempt employers such as charities.
  • On Jan 1, 2014 the rate will increase to 50% and 35% respectively
  • 50% contribution requirement
  • Employers with 25 or fewer FTE’s must have average wages of less than $50k per year
  • 20 half time employees are equivalent to 10 full workers*

*Please visit the IRS website to determine Tax Credit eligibility.

Q: What is the SHOP?

  • Provides side by side comparisons of Qualified Health Plans (QHPs) to simplify choices and increase employee options
  • Ease of access to broker assistance through Washington Healthplanfinder
  • Access to the Small Business Premium Tax Credit
  • Learn more (PDF)

Q: How Do Small Businesses Participate in SHOP?

  • Employer of up to 50 employees
  • Meet minimum participation requirements
  • Offer of coverage to full time employees
  • The small business must be located in Washington
  • State or has employees serving a primary worksite in Washington State

Q: What are the benefits of SHOP?

  • Ease of use for employers and employees
  • Expedites the plan selection process
  • Side by Side plan comparisons
  • Access to small business tax credits
  • Minimum 50% employer contribution requirements

Q: I understand that the employer shared responsibility provisions apply only to employers employing at least a certain number of employees? How does an employer know whether it employs enough employees to be subject to the provisions?  

A: To be subject to the Employer Shared Responsibility provisions, an employer must employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50 (for example, 40 full-time employees employed 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average are equivalent to 50 full-time employees). Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year. For example, if an employer has at least 50 full-time employees, (including full-time equivalents) for 2013, it will be considered a large employer for 2014.

Employers average their number of employees across the months in the year to see whether they meet the large employer threshold. The averaging can take account of fluctuations that many employers may experience in their work force across the year. For those employers that may be close to the 50 full-time employee (or equivalents) threshold and need to know what to do for 2014, special transition relief is available to help them count their employees in 2013.

Q: What is the Business Exchange?

  • Small businesses with up to 50 employees
  • Employer ability to define their percentage of contributions and access to small business tax credits
  • Employee access to employer sponsored plans with increased choice
  • Open enrollment 10/1/2013 for coverage effective 01/01/2014

Q: When is the next Affordable Care Act that I need to know about?

On October 1st, open enrollment in the Health Insurance Marketplace begins. Coverage would be effective January 1, 2014.

Q: What is the Insurance Marketplace?

The Marketplace is designed to help individuals and businesses find health insurance that fits their budgets. Every health insurance plan in the new Marketplace will offer comprehensive coverage, from doctors to medications to hospital visits.

Q: Where can I find the health care options?

The Washington Health Exchange has set up the Washington Healthplanfinder website to give individuals, families, and small business owners the ability to choose the plan that best fits their needs and their budget. According to the website, the Washington Healthplanfinder offers:
  • Apples-to-apples comparisons of health insurance plans
  • Financial help to pay for copays and premiums
  • Expert customer support online, by phone, or in-person through a local organization, insurance broker or agent

Q: What is a qualified Health plan?

  • Qualified health plans must:
  • Include the ten essential benefit categories
  • Offer sufficient choice of providers
  • Measure service quality and patient satisfaction
  • Provide accurate, understandable consumer information
  • Be a private health insurance company