The recent Supreme Court decision upheld almost all of the Patient Protection and Affordable Care Act (PPACA). Although many of the provisions of the PPACA are already in effect, businesses, large and small, need to prepare as more provisions of the Act are implemented over the next few years. While many of the provisions of the PPACA impose new requirements for larger businesses, the Act will impact small employers as well. This article will attempt to highlight those provisions of the Act that are of special concern for employers.
Large Employer Requirements
If an employer qualifies as a large business (defined as having 50 or more full-time equivalent employees), then the employer must either provide employees with employer-sponsored coverage that meets specified requirements or pay certain fees. The coverage requirements are too detailed to explain in this article, but they provide minimums as to the coverage amount and the scope of the coverage. These requirements include non-discrimination for pre-existing conditions, coverage to children until the age of 26 (with certain exceptions), and more. In addition, the coverage must be affordable. Health care coverage is affordable if:
You can access more information on the other requirements for group health plans at the IRS newsroom – http://www.irs.gov/newsroom/article/0,,id=227943,00.html.
A large employer which does not provide for access to group health plans will be subject to certain fees. For instance:
All penalties increase proportionally with the rise in cost of the insurance premium for the employees.
Effects on Small Employers
Employers with fewer than 50 full-time equivalent employees are exempt from the requirement to offer such coverage. However, there is a small business tax credit to encourage small businesses to offer affordable health care coverage. To be eligible for the tax credit, the employer must:
Currently, this tax credit covers a maximum of 35% of the employer’s contribution towards the insurance premiums. In 2014, this tax credit will increase to a maximum of 50%. If the small employer is tax exempt, then the tax credit is up to 25% currently and will go up to 35% in 2014. Even if the tax exempt employer has no taxable income, the employer may receive this credit as a refund if it does not exceed the employer’s Medicare tax liability or income tax withholding.
Timeline for the Implementation of PPACA Provisions
The employer penalties described above do not take effect until January 1st, 2014. However, the small business tax credit is already in place. Many of the other requirements of PPACA currently in place relate to changes in the Medicare and Medicaid programs. In order to follow the implementation of PPACA in its entirety, please visit: http://healthreform.kff.org/Timeline.aspx. This link provides a timeline and other vital information regarding what will be implemented each year.