It’s been in the headlines for years, and now it’s knocking on our doors. Obamacare has arrived…but not without a myriad of questions. Here is a look at this issue from both a business and individual perspective.
Businesses
Even though business owners have an extension until 2015 on the pay-or-play provision, now is the time to look at how the Affordable Care Act will impact you and your employees. The following are questions you should ask yourself.
Q: Is dropping coverage is an option for my business?
A: This is very fact-specific to your business, your employees and your plans for the future. If you can’t afford to provide coverage, the exchanges are a viable alternative for your employees. In some cases, it may actually help you and your employees to drop coverage – if sending employees to the exchange results in lower employer cost, the same or lower average employee cost and the same or better coverage. You’ll need specific information from your employees to make the calculation, but it’s a viable option for some.
Q: With insurance premiums set to increase again this year, how can I lower this expense?
A; You first need to determine if you’re considered a large employer. If you have 50 or more full-time equivalent employees, you must offer health care to your employees or you’ll pay a penalty. Even with the penalty, dropping insurance may work out better for you and your employees.
If you have fewer than 50 employees, you have the option to go to the Small Business Health Options Program (SHOP). Through this business exchange, you can provide your employees access to various insurance plans. You can let them buy insurance with pre-tax dollars and you can provide a contribution if you want, but you don’t have to. If you meet certain requirements, your business may even be eligible for a tax credit.
Q: Is it possible for my employees to pay less if they go to the exchange for insurance?
A: Yes, your employees could pay less if they obtain health coverage through the insurance marketplace. If a large portion of your workforce is eligible for premium subsidies, or if you have a relatively small group that has several very high insurance claimants, the marketplace may be your best bet.
It’s important to remember that employees can only get subsidies if you don’t offer minimum value, affordable insurance.
Q: Can I give pre-tax money to my employees so they can get their own insurance?
A: If you’re a large employer, you cannot give pre-tax money to your employees for health insurance purposes. However, if you’re a small employer in Ohio, and you go to SHOP to get coverage for your employees, then you can offer employees pre-tax money for insurance. And you can always consider raising wages or salaries for any employees who will see increased costs.
Individuals
Individuals did not receive an extension, so they need to have insurance by Jan. 1, 2014, or they will face a penalty. The following questions highlight some of the biggest concerns individual have right now and provides guidance on options available.
Q: Can my employer drop my coverage?
A: Yes, it’s possible for companies to drop coverage for all employees (though there are restrictions in limiting coverage to only certain employees). Employers with 50 or more full-time employees or equivalents that choose this route will pay government-imposed penalties, which are often cheaper than offering health insurance.
Q: My employer dropped my coverage. What are my options?
A: You have the opportunity to purchase insurance through your state’s insurance marketplace or exchange. Check out www.healthcare.gov. There, you can answer a few brief questions, see what various insurance plans will cost and find out if you are entitled to premium subsidies that are like financial aid from the government to help you pay for insurance. It can also point you to your state-run exchange if you aren’t covered by the federal exchange.
Whether your employer drops your coverage or continues to offer it, you have the option to choose insurance from the marketplace.
Q: What kind of fees will I pay for exchange insurance?
A: Exchange coverage prices are based on the following:
- Age
- Smoker or non-smoker
- Zip code
- Metal tier selected
- Premium subsidies
There are four metal tiers of coverage: bronze, silver, gold and platinum. The higher the metal tier, the higher your monthly premium cost, but the lower the cost share (deductibles, co-pays and the like). Premium subsidies are available to help offset the cost of insurance for those who qualify. However, you will generally have to use after-tax dollars to buy exchange insurance.
Q: Can my employer set up something through my company’s payroll to help me pay for coverage on the exchange?
A: Perhaps. It’s important to note that your employer cannot help you pay for coverage on a pre-tax basis. The government agencies administering this (Health and Human Services, Internal Revenue Service and Department of Labor) issued guidance in September that closed loopholes that would have allowed this. However, your employer can offer you after-tax payroll as a convenience to you.
if you are part of a retiree-only plan, you could still benefit from some of the loopholes that allow for exchange insurance to be purchased pre-tax.
This article was originally published in The Rea Report, a Rea & Associates print publication, Fall 2013.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.