Employer Requirements


This is another good topic for this week’s blog. I enjoy how these subject matters are very pertinent to today’s political and economic debates. The quiz was a great way to start discussions. I got a 8/10 on the quiz. I knew a fair amount on the rules behind the PPACA, but I did not expect to get an 80%. I would admit that this quiz was not the best indicator of my knowledge since I guessed on a couple of questions. One question I got wrong was “Will the health reform law require employers with 50 or more employees to pay a fine if they don’t offer health insurance?” The answer is yes. I was unaware of this provision. I did not know the PPACA required employers, who employed over a certain threshold of full time employees,  to pay a fine. Instead I was under the impression employers would only face a fine if they did not offer health insurance to employees who worked over thirty hours a week.

employer-penalty-flowchart-v3-071513

The provision, 4980H, applies to “applicable large employers” or companies that employ more than 50 full time employees.  If small companies do not meet the “applicable large employer” criteria, the penalties do not apply to them. Furthermore the small employers may be eligible for a health insurance tax credit if they employ fewer than 25 employees and the average income is up to $50,000. The provision requires large employers to offer its full time employees and dependents to enroll in minimum essential coverage under the employer-sponsored plan, or pay a $2,000 penalty annually multiplied by the number of full time employees, excluding the first 30 workers. However if the employer offers coverage but the insurance does not pay for at least 60% of covered health care expenses for a typical population or if at least one of the employee(s) has to pay 9.5% or more of family income for the employer coverage, then the workers can buy coverage in an Exchange and receive a premium tax credit. Thus making the employer will pay the lesser of a $3,000 penalty annually multiplied by each full time employee receiving a tax credit or a $2,000 penalty times the number of full time employees, minus 30.  The chart to the left illustrates the requirements of employers to offer coverage to their employees. This provision also requires employers with greater than 200 employees to automatically enroll workers into the health insurance plans offered by the employer. However the employees do have the option to opt out of the coverage.

This provision seems reasonable to me. There must be a threshold to determine who is a “large employer.” However, fifty full time employees did seem to be a low number to me at first considering the number of small businesses in today’s economy. The penalties also seem rather large to me. If one employees receives a premium tax credit, the employer can be penalized $2,000 for each full time employee, excluding the first 30 employees. This penalty can be huge depending on the number of full time employees.

According to the image below, it seems Obamacare is viewed very negatively by small business owners. ObamaCare-Small-Businesses-final_71713

On the other hand, according to Rosenberg in Small Businesses Give Obamacare Mixed Reviews Despite Strong Signup Rates, more small businesses have signed up at state exchanges for Obamacare than expected. Some small businesses, especially in NY, VT and MN, are pleased with the rates and coverage offered from these exchanges and have enrolled in plans, while others still plan to buy insurance privately. The rates are considered to be comparable, or only a little more expensive, with what companies are paying now for insurance. The article states, “Members of the Small Business Majority are generally pleased by what they’ve seen, says John Arensmeyer, CEO of the advocacy group.” However other small businesses are disappointed, including Dr. Leo Lombardo. He is shocked he won’t get a break from the California exchange for the employees he plans to hire soon. According to the new provision, if the average salary for employees is over $50,000, the employers will not receive a tax credit and Dr. Lombardo plans to pay his new employees $80,000.

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2 comments on “Employer Requirements

  1. Well-explained.

    I am not sure why Dr. Lombardo is upset. If he has the revenue to pay that much, and he has more than 50 employees, there is likely to be “normal” employee-based plans that are affordable.

    The point of the subsidies is to take something we think of as essential-health insurance- and make it accessible for people through their employers without bankrupting the employers.

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