Last year employers enjoyed a reprieve regarding the requirement to provide health insurance. The starting date of employer reporting requirements to comply with ObamaCare was pushed back from January 1, 2014 to January 1, 2015 (IRS Notice 2013-45).
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But 2015 is sneaking up on us rapidly, and it’s important to know what your business must do.
Beginning in 2015, certain employers with 50 or more full-time employees, or full-time equivalents, must offer health insurance to full-time employees and their children up to age 26 or be subject to penalties. This is known as the employer mandate. Employees who work 30 or more hours per week are considered full-time.
I spoke with Missy Jaeger of Keas, a health management firm specializing in advising on health benefits for businesses. Their main focus is wellness and prevention, however they advise their clients on health insurance and on the impact of the Affordable Care Act (ACA).
“The Affordable Care Act has created many challenges for employers. Everything done so far has increased their cost,” says Jaeger.
Setting up and administering plans and checking compliance levels can be very time consuming, not to mention costly, for business owners.
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It would behoove small business owners not facing the employer mandate to consider providing health insurance plans to employees. It’s a form of pay that is free from taxation and therefore very attractive for employers and employees as well. Jaeger says, “The biggest tax break is health care. Employers spend $250 billion on health care benefits each year. Of that, $180 billion goes as tax breaks to the employee population. This is a bigger deduction than mortgage interest and any other tax breaks Americans enjoy.”
Consider the tax breaks when analyzing your costs. If your business is required to provide health insurance, then you will be thinking, ‘how do I fulfill ACA requirements cost effectively?’ Jaeger believes employers should explore consumer directed health plans with high deductible and low benefits. The premiums would be lower, and those covered would end up paying more at the point of service.
“Otherwise employees can go to a private exchange to seek benefits, go to a public exchange through the state or the federal government. Employees may even have the option to apply through Medicaid,” she says.
Jaeger adds, “Health care costs will continue to rise as technology increases unless we do things differently. What will help the ACA become effective is for each individual to participate in prevention by living healthy lifestyles – exercise, weight control, proper diet.”
It is anticipated that there will be a 4.5% to 5% increase in costs of health care for 2015. Even with these premium increases, the number of small employers threatening to terminate plans decreased from 23% in 2013 to 16% in 2014.
Small employers who provide health care may enjoy the Small Employer Health Insurance Credit, which increased in 2014 to 50% of premiums paid. Check with your tax professional as there are plenty of rules surrounding the ability to take this credit.