Health Insurance Laws for Employers under Obama Care

Requirement to Offer Health InsuranceUnderstanding the requirements for offering health insurance involves several factors that need to be considered.

Are you a Large Employer?

To determine if you are an Applicable Large Employer, subject to the Health Insurance Mandate, you will need to determine if you are a Small Employer or Large Employer as classified by the IRS. Please use the following worksheet as a guide.

_____ Number of Full-Time employees (averaging 130 hours/month)
_____ Number of Part Time hours worked divided by 120 = # of Full-Time Equivalent Employees
_____ Total number of Variable Hour Employees that are classified as Full Time

_____ Total number from all 3 categories

If this number is less than 50, you are not subject to penalties for not offering Affordable Health Insurance. If this number is greater than 50 you are a Large Employer under Obama Care and could be subject to penalties for not offering Affordable Health Insurance.

Excluded Hours or Employees

  • Only hours worked in the US are considered
  • Seasonal Employees who work less then 120 days per year may be excluded

You will have to complete this calculation every month.

Also in December (every year) you will be required to take the last 12 months of your employee headcount per month, add them together and divide by 12 to find the average for each month. If this number is more than 50 you will be classified as a Large Employer for the entire next year.

Transitional Rule for 2014

The Transition Rule will allow an employer in 2014 only, to use any six consecutive calendar months of data, rather than the entire calendar year (divide by 6 instead of 12). For 2015 and beyond, the calculation will be 12 calendar months. Once you have determined whether or not you are an Applicable Large Employer, it is time to consider the remainder of the qualifications outlined in the act.

When will our Company Plan be subject to Health Care Reform

The IRS is also letting the employer keep their current coverage until their renewal period in 2013. This means that if you renew in November 2013 you will be able to keep your plan and not be subject to the regulations of Obama care until November 2014. Certain carriers will permit an off-cycle renewal date of December 1, 2013 to push the changes off as long as possible.

Serving Sacramento, Roseville, Rocklin, Northern California.

Davids Note: Postponing the effects of Health Care Reform for your business could be a wind fall for 2014. Several insurance companies are allowing early renewal of your insurance plan on December 1st 2013, so you may postpone these changes as long as possible. Only through a careful consideration will you be able to determine if this course will be beneficial for your business.

Changing to the Affordable Health Care Act

The IRS does understand that changing existing terms or coverage mid-year is problematic with all the current rules in place regarding Employee Benefits regulations. With that in mind, exceptions have been allowed for participants in plans that were in effect since December 27, 2012. The reason for these exceptions is that they want everyone to be able to enroll onto the government benefit plan January 1st 2014.

  • The exceptions will apply to all employees the 1st day of the 2014.
  • Relief from the act requirements is provided also for mid-year elections under a cafeteria plan for group health, beginning in 2013 and ending in 2014. (Usually this items can only be changed at the plan open enrollment)
  • Employees who elected for salary reduction in lieu of health coverage to change or revoke his election. (Applies to FSA Contributions.)
  • Employee who did not take a salary reduction for health coverage to make an election prospectively.

These actions permit any employee to drop employer coverage as of December 31, 2013 and enroll through an exchange, avoiding any penalty from the Employer or Benefit plan. (The Government wants people to enroll in their coverage and are changing the rules to accommodate this action.)

Resources used in writing this Article

  • IRS Notice 2012-58 Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding health Coverage
  • Department of Labor Technical Release No. 2012-01 FAQ from Employers Regarding Automatic Enrollment, Employer Shared Responsibility, and Waiting Periods

About David Brown

David Brown is a California Benefits Broker, who specializes in providing small businesses with the savings that only large companies usually get.

If you feel David could help your California business with employee benefits, health insurance, and healthcare reform issues, you can contact him directly below:

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