One of the topics that comes up very often from clients that use our staffing software is the issue of the Patient Protection and Affordable Care Act (PPACA), otherwise known as Obamacare, and how it is going to affect their business. If you haven’t yet started to plan for the PPACA and its impact on your business, you are already behind the 8-ball for certain. However, the main impact for business doesn’t take effect until 2014, so there is still time to study the law and determine how to address some of its issues. As of this writing, the Supreme Court has also not rendered a decision on the challenge(s) to the act, so the assumption for our purposes is that the act will stand intact as a whole.
The overwhelming concern of most clients I speak with is whether to offer coverage or deal with the penalty if an employee is certified to receive a subsidy to purchase healthcare coverage through the state exchange. Employees are eligible for a subsidy if you do not offer full-time employees and their dependents a health plan OR the plan offered is deemed “unaffordable” or does not provide “minimum value”. It should be noted that this only applies to what are termed large employers—those employers with 50 or more full-time equivalent employees (this is a topic for discussion next week). Getting down to brass tacks, what are these penalties exactly:
- If you do not offer coverage, the penalty is $166.67 per month on all full-time employees minus 30. This equates to $2,000 per year per full-time employee above 30 full-time employees.
- If you do offer coverage, the penalty is $250.00 per month, but only for employees that have been certified and receive a subsidy. This equates to $3,000 per year per employee, but only on those employees receiving subsidies.
- Neither of these penalties are tax-deductible!
The key issue if you offer coverage is the penalty only applies to those employees receiving a subsidy. This is a big issue in that in order to be certified to receive a subsidy, the employee must fill out paperwork and submit 2 years of tax returns at a minimum as things currently stand. Basically, you can elect to offer coverage and roll the dice that employees will not go through the trouble to be certified to receive a subsidy.
At BWSI we aren’t advocating any approach nor suggesting a course of action, simply pointing out options for you to consider. In the interest of full-disclosure, BWSI offers and completely covers all our employees with rich benefit plan, of which the premiums that BWSI pays are fully tax-deductible (a big consideration). We will be covering several topics over a series of posts on PPACA and how it could affect your business, including the as of yet finalized definition of “full-time”, affordability testing, look back periods, nondiscrimination testing (a potentially big issue for staffing agencies), as well as a method to help you analyze and evaluate these issues in your business.