David Bottoms, senior vice president at Marietta-based The Bottoms Group, has spent several months advising clients who were awaiting the presidential election to know if the law would indeed be implemented.
Likely the most discussed stipulation of the law for business owners is the mandate that employers with more than 50 full-time employees provide essential coverage at an affordable cost or face a $2,000 penalty per employee, per year.
Bottoms said he has told clients to “think long and hard before making an employee full-time.”
“Employees working more than 30 hours per week are required to be eligible for health coverage; part-timers are not,” he said.
David Cole, an employment law attorney at Freeman Mathis & Gary, cautions that in addition to the full-time employee definition of someone who works 30 hours or more per week, employers have to count an additional number of “full-time equivalent” employees.
“This is determined by adding together all of the hours worked by part-time employees during a month and dividing that number by 120,” Cole said. “If the number of full-time and full-time equivalent employees is greater than 50, then the employer must satisfy this requirement of offering coverage. If an employer has fewer than 50 full-time and full-time equivalent employees, then it is not affected by this provision of Obamacare.”
Cole cautions that there are two ways a covered employer will pay a penalty. First, an employer may have to pay a penalty if it does not offer any insurance coverage to its full-time employees and their dependents.
“In that case, for any month in which an employee enrolls in health insurance through a state exchange and is allowed a premium tax credit or cost-sharing reduction for doing so, the employer will be assessed a penalty in the amount of $167 dollars for every individual employed in a full-time capacity that month, except for the first 30 full-time employees,” Cole said.
Cole says secondly, an employer may have to pay a penalty if it offers insurance coverage, but the plan’s share of the total allowed cost of benefits is less than 60 percent or if the coverage is deemed “unaffordable.”
“The coverage is deemed “unaffordable” if the employee premium for single-employee coverage is more than 9.5 percent of the employee’s household income,” he said.
He explains that in these situations, an employee would be allowed a premium tax credit or cost-sharing subsidy if he enrolled in health insurance through a state exchange. If this occurs, then the employer will be assessed a penalty in the amount of $250 per month for each employee who enrolls in insurance through an exchange and receives a credit or subsidy.
Additionally, employers with 200 or more full-time employees will have to automatically enroll new employees in one of their employer-sponsored plans, Cole said. Employees who do not want coverage will have to affirmatively “opt-out” of the plan after being enrolled. This is the opposite of the current system, in which employees typically have to “opt-in” to their employer’s plan.
The law does not specify when large employers will have to begin automatic enrollment, but the Department of Labor has issued notice that it will not enforce the provision against large employers until it issues further regulations on how the automatic enrollment is to be accomplished. The department has reported that it does not expect to issue these regulations until sometime in 2014.