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Employers  & The Affordable Care Act 

What is the Affordable Care Act (“ACA”)?

Signed into law in 2010, the ACA (actually entitled the Patient Protection & Affordable Care Act) required every US citizen to have health insurance or pay a tax penalty. (Note: In December 2017, President Trump signed  the Tax Cuts and Jobs Act, which repeals the ACA tax penalty effective 2019). The three primary goals of the ACA include:

  • Making affordable health insurance available to more people by providing individuals with premium tax credits, which lower costs for households with incomes between 100% and 400% of the federal poverty level.
  • Expanding the Medicaid program to cover all adults nationwide with income below 138% of the federal poverty level.
  • Supporting innovative medical care delivery methods designed to lower the costs of health care, generally.

Employers and the ACA

Small Employers. Employers with less than 50 full-time employees do not face penalties for declining to offer healthcare coverage. These employers can, however, still purchase coverage for their employees through the Small Business Health Options Program (“SHOP”).

Employers with less than 25 full-time employees may be eligible for a health insurance tax credit IF:

  • The average annual wages of the employees is $50,000 or less;
  • The employer covers at least 50 percent of their full-time employees’ premium costs; and
  • The coverage is purchased through the SHOP

Large Employers. Employers with 50 or more full-time employees during the preceding calendar year are considered applicable large employers (“ALEs”). To avoid penalty, ALEs must:

  • Offer health insurance coverage to at least 95% of their full-time workers AND their dependent children (under the age of 26). (Note: spouses are not considered dependents); and
  • Offer health insurance that pays for at least 60% of the covered health care expenses (minimum value).

According to the IRS, an ALE may be subject to a penalty IF:

  • It does not offer minimum essential coverage to at least 95 percent of its full-time employees (and their dependents), and
  • At least one full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace.

It is important to note that even if an ALE provides minimum essential coverage to at least 95 percent of its full-time employees, the ALE may still be required to pay a penalty for each employee who receives the premium tax credit.

For All Employers. Regardless of size, any employer who provides self-insured health coverage must file an annual return for each individual they cover. This return must report what health insurance(s) the employer offered its employees.

For more information, contact York Bowman Law, LLC.

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