If you own and run a small business employing primarily low-wage workers, you may have paid less attention to the advent of the Affordable Care Act (ACA) than your larger business partners, simply due to your employees' ability to secure health insurance through your state's Medicaid program. However, in some cases the availability of this coverage may not be enough, and a failure to offer health insurance to your employees could subject you to stringent fines until this problem is rectified. What are your obligations as an employer to your lower-wage employees? Read on to learn more about the ACA's requirements and what you'll need to do (and offer) as an employer to help avoid civil penalties under this law.
Does the ACA obligate you to provide health insurance for all employees?
Among other changes to the health insurance process, the ACA instituted a health insurance mandate for many employers. Although this portion of the law (the Employer Shared Responsibility Provision, or ESRP) was signed into law with the rest of the ACA, the ESRP was first scheduled to take effect in 2015 and 2016 for most employers, with fines and penalties being assessed on employers who aren't in compliance with this law by the end of 2016.
The ESRP requires small businesses employing 50 or more people to make health insurance coverage available to at least 95 percent of their workforce through an employer-sponsored policy. For businesses with more than 50 but fewer than 100 full-time employees, this 95 percent threshold doesn't need to be reached until the end of 2016; however, businesses with more than 100 employees should have offered insurance to at least 70 percent of employees in 2015, and will also be required to reach the 95 percent offer rate by late 2016. Failure to offer this health insurance or reach the requisite number of enrollees can subject you to a hefty fine of $2,000 to $3,000 per uninsured employee per calendar year.
On the other side of the coin, businesses with fewer than 50 full-time employees can qualify for tax credits or incentives by offering affordable healthcare coverage to workers. As the ACA continues to change and expand, it may be prudent for you to investigate the cost of healthcare coverage for your employees even if this mandate doesn't yet apply to you.
Do you need to offer health insurance if most of your employees are eligible for Medicaid?
In some industries employing primarily low-wage workers, the ACA has presented quite a conundrum. Because these workers are normally eligible for government-sponsored insurance through the Medicaid program, past employers have seen little reason to investigate or offer an alternative health insurance policy that few employees were likely to need. However, there exists no exception or exemption in the ACA for low-wage employers, and any policies your business offers must continue to meet the affordability guidelines based on these employees' lower household income. For insurance to be deemed "affordable" under the ACA, the monthly premium must cost no more than 9.5 percent of the employee's wages -- so only around $130 per month for an employee earning $8 per hour for a 40 hour workweek. Offering insurance with an "unaffordable" premium can still subject you to penalties for noncompliance with the ACA.
Fortunately, simply because you offer healthcare coverage doesn't mean your employees will have to take it. Unless you can find a plan that offers significantly expanded coverage at a lower cost than Medicaid, it's unlikely many of your employees will be eager to make a plan change. Working with an insurance broker from a company like NFP, P & C, Inc. to find a policy that meets affordability thresholds for your employees yet is less attractive than Medicaid can be a worthwhile way to avoid the civil costs and fees that will soon be assessed if you take no action at all. If you find it difficult to find plans meeting the affordability threshold for your workers, you may also want to run the numbers to determine whether offering a small across-the-board raise can help boost salaries (and therefore the threshold) enough to help you avoid a penalty.