What You Need to Know About the ACA for 2015

With all the recent changes and delays to the Affordable Care Act (ACA), it’s easy to lose track of what you as an employer are required to do and what can wait for another day. Let’s take a quick look at what has and hasn’t been delayed for small businesses and what you need to be doing now to prepare for 2015 and beyond.

Employer Mandate—Size Matters

Although much has been made of the ACA’s employer mandate (also called the “Play or Pay” requirement), you may not have been paying much attention because the mandate applies only to organizations that have at least 50 full-time employees.

However, even small employers may be covered by the Play or Pay requirement if they have enough full-time and part-time employees, combined, to be the equivalent of 50 full-time employees. To determine how many full-time equivalents you have, you must add together all hours worked by part-time employees and divide by 120.

For example, consider a company that has 25 full-time employees and 30 part-time employees who each work 100 hours per month. The part-timers equal 25 full-time equivalents and, therefore, the company meets the 50-employee threshold. Such a company would be subject to the employer mandate in spite of the fact that it has nowhere near 50 full-time employees.

Similarly, a small employer could be covered by Play or Pay if it is part of a controlled group or affiliated service group of companies and, combined, the related companies have 50 or more full-time employees. For example, a company with 20 full-time employees that is the subsidiary of a company with 30 or more full-time employees would have to comply
with Play or Pay.

Finally, companies that are expecting growth over the next year should keep an eye on the ACA and educate themselves on the Play or Pay requirements in the event they exceed the 50-employee mark.

Employee Subsidies

Another important thing to keep in mind is that, even though the Play or Pay penalties have been delayed, you still might have employees who get coverage and a subsidy from the ACA Exchange. When that happens, you may receive a notice and request for information from the IRS, which determines whether the individual received the subsidy appropriately. Prepare for this in advance by developing an action plan for how to respond when that happens.

Small Employer Tax Credit

Unlike many other ACA provisions, the small employer tax credit has not been delayed. In general, the credit is available to employers that:

  1. Have fewer than 25 employees
  2. Pay them on average less than $50,000 annually
  3. Pay at least half of the premium for employee-only coverage, and
  4. Purchase insurance through the federal Small Business Health Options Program Marketplace (SHOP)

Premiums paid for insurance purchased in the private market no longer qualify for the credit.

Keep in mind that it’s not as simple as paying your employees’ premiums throughout 2014 (or 2015) and deciding whether you can claim the credit when you prepare your taxes the following year. Instead, the potential availability of the credit needs to guide your decision making when you offer health benefits to employees for the 2014 or 2015 plan years. The biggest decisions include whether to adjust the percentage of employee premiums you pay, move your coverage to the SHOP or both.

Small Group Market Reforms

The ACA was designed to dramatically alter the structure of the small group insurance market. In addition to requiring all non-grandfathered plans in the small group market to offer a designated list of “essential benefits,” the law requires carriers to use age-based community rating in calculating premiums. This means that all premiums within a certain geographical area are predetermined and based solely on the age of individual participants and whether they use tobacco.

Community rating may be beneficial for some small employers and not for others, depending on the makeup of their employee population. In other words, some employers may see large increases this year, while others may actually see their rates go down.

The Danger of ACA Fatigue

It’s easy to be overwhelmed by all the news and controversy surrounding the ACA and its troubled rollout. But small employers need to resist the urge to bury their heads in the sand and hope for the best. Your best bet is to start the renewal process earlier than usual to make sure you have plenty of time to consider and implement any necessary changes.