The 2010 Health Care Reform Act contains many provisions designed to expand access to affordable health coverage. These include provisions for automatic enrollment of full-time employees in an employer’s health plan, shared responsibility of employers regarding health coverage, and coverage to be offered through State-based Affordable Insurance Exchanges.
The Employer Shared responsibility provisions, which become effective in 2014, impose penalties on certain large employers that do not provide health coverage or that provide inadequate or unaffordable coverage. In general, a large employer (one with 50 or more full-time employees, including full-time equivalent employees) could be subject to a penalty if at least one full-time employee is certified to receive an applicable premium credit. This could occur under the two following situations:
- 1. Employers That Do Not Provide Coverage:
A large employer does not offer health coverage to its full-time employees and their dependents; or
- 2. Employers That Do Not offer Affordable or Valuable Coverage:
A large employer offers its full-time employees and their dependents the opportunity to enroll in health coverage that is deemed unaffordable to the employee or it does not provide minimum value.
What is a Large Employer?
A large employer is one that has 50 or more full-time employees or full-time equivalents during the preceding calendar year. To determine whether an employer is a large employer, the following should be considered:
- A full-time employee is one who averages at least 30 hours a week or 130 hours in a calendar month
- A full-time equivalent employee is calculated by adding the number of hours for all part-time employees (up to 120 hours per employee) during the month and dividing that amount by 120.
What is a premium assistance tax credit?
Under the new law, there is a refundable tax credit available to individuals whose income is less than or equal to 400% of the federal poverty level and who purchase health insurance through an exchange. For a family of four in 2012, this would apply to those with annual incomes of $92,200 or less.
What is the penalty?
The penalty is $2,000 for each full-time employee, excluding the first 30 employees, for those employers that do not provide coverage under the first scenario above. Under the second scenario, where unaffordable or low value coverage is provided, the penalty is $3,000 per full-time employee that receives a premium tax credit for insurance, but the maximum penalty is $2,000 times the number of full-time employees over the 30-employee threshold. The $2,000 and $3,000 penalties are to be assessed on a monthly basis (1/12th per month).
Our team at Warren Averett, LLC is available to help you determine what your responsibilities under this provision may be. Please contact us for assistance or if you have any further questions regarding the Shared Responsibilities Provision.