What You and Your Business Need to Know About Obamacare, Year 2

For business owners, two things in life are certain: taxes and rising health care costs. The two become nearly interchangeable when new IRS Health Care Reporting requirements go into effect, starting in 2016.

Under the Affordable Care Act (ACA), large employers (or those employing more than 50 full-time workers) face penalties if they fail to offer minimal coverage to employees. Prior to the Affordable Care Act, health insurance decisions were largely up to the individual business.

Beginning in 2016, large employers must report very specific information to the IRS to remain compliant, and the IRS has recently issued draft copies of the health care coverage forms.

Smaller companies with 50 to 99 full-time equivalent (FTE) employees will be required to provide health benefits by 2016. Companies with 100 or more full-time employee will be required to offer health benefits to 70 percent of their FTEs by 2015 and 95 percent by 2016.

To prepare for these changes, wise employers are taking steps now to find effective ways to best manage the costs and administration of healthcare coverage to their full-time employees.

The true cost of  “Affordable Care”

While health care costs are expected to level off nationally for larger companies to about 4 to 6 percent, small businesses may see some of the biggest increases ever. Staggering annual increases are anticipated in the small group market, particularly in the states of Delaware, Pennsylvania, California and Florida.

According to a survey conducted by Morgan Stanley, Delaware and Pennsylvania will have the largest increases with 100 percent and 66 percent, respectively.

The nation’s new health care climate has prompted many businesses to offer employees higher deductible plans at a reduced savings to them, and incentives such as tax-free health savings accounts and employee wellness programs.

This is good news for employers but not always the best scenario for employees who may have trouble making higher deductibles for their current health plan or can’t afford the higher monthly costs of the plans offered through the “marketplace” or ACA health care program.

States seeing the biggest increases

According to Inside Obamacare, an eBook from Forbes, the cost of health care has increased in the small group market about six times that of larger companies in some states. The 10 states seeing the biggest increases are:

  • Washington — 588 percent;
  • Pennsylvania — 66 percent;
  • California — 37 percent;
  • Indiana — 34 percent;
  • Kentucky — 30 percent;
  • Colorado — 29 percent;
  • Michigan — 27 percent;
  • Maryland — 25 percent;
  • Missouri — 25 percent; and,
  • Nevada — 23 percent.

Employee wellness incentives, such as fitness membership discounts and nutritional counseling and information, are attractive options and generally well received. At the end of the day, however, the bottom line is the out-of-pocket expense of staying healthy for both companies and their employees.

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One year later: 13.6% still without health insurance

When the Affordable Care Act went into effect in 2010, the law offered the promise of health care coverage for all. As we approach the one-year anniversary of the first open enrollment period (the “Marketplace), there are now 41 million Americans still without health insurance, or about 13.6 percent of the population.

Although one (1) million fewer Americans are now uninsured than a year ago, approximately 5.6 million businesses are reeling from the differences in the way health insurance is priced, with some companies seeing their health care premiums almost doubling.

Some of these changes will undoubtedly affect companies’ profitability and ability to hire new employees, or even keep their existing number of employees. Time will only tell how Obamacare will affect the unemployment rates in the longer term.

A recommendation: Comply, report, and relax

The best way for business owners to keep up with the changes is to keep informed, and compliant. It’s also important to communicate options to your employees clearly, and as they occur.

Here are some important things to remember:

  • New reporting requirements for business under Internal Revenue Code Section 6055 and Section 6056. Code Sec. 6055(a) mandate that every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs, and other entities that provide minimal essential coverage (MEC) to file annual returns reporting information for each individual for whom MEC is provided.
  • Reporting requirements under Code Sec. 6056 apply to “applicable large employers” or employers with at least 50 full-time employees.
  • Code Sec. 6056 requires annual information reporting by applicable large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
  • Under these new reporting rules, businesses must provide the IRS with information about the health care coverage they are or are not offering to their employees. For the purposes of information only, this past July, the Internal Revenue Service (IRS) released draft versions of:
    • Form 1094-B: Transmittal of Health Coverage Information Returns
    • Form 1095-B: Health Coverage
    • Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
    • Form 1095-C: Employer-Provided Health Insurance Offer and Coverage

Preparing for 2015

For employers, there are a few things to be aware of as 2015 approaches.

  • Small businesses with 50-99 full-time equivalent employees will need to start insuring workers by 2016. Those with a 100 or more will need to start providing health benefits to at least 70 percent of their FTE by 2015 and 95 percent by 2016.
  • The annual fee is $2,000 per employee if insurance isn’t offered (the first 30 full-time employees are exempt).
  • If at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.
  • The fee is a per month fee due annually on employer federal tax returns starting in 2015 for small businesses with 100 or more full-time equivalent employees(2016 for those with 50-99). So, the per-month fee is 1/12 of the $2,000 or $3,000 per employee.
  • Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.

To read more about these drafts and new regulations, visit IRS.gov or contact and employee benefits specialist.

Jennifer Schaefer is a leading group health insurance and employee benefits specialist with more than 20 years of experience managing client benefit programs. Her clientele consist of businesses that range from 30 to 30,000 employees. With her extensive knowledge of insurance options, Jennifer works diligently to provide her clients cost-effective, customized programs that follow healthcare legislation, state and federal guidelines. Contact her at Jschaefer@1847Financial.com, or at (877) 355-6070.

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