If your company is large enough – that means 50 or more full-time employees – your benefits and human resources people are probably already scrambling to make sure you’re ready for the implementation of the Affordable Care Act (also known as Obamacare) next year.
The law is intensely complicated and, to make matters worse, legislators from both parties are still talking about what could be substantial changes before it is fully implemented.
No one could blame you for feeling like you’re shooting at a moving target. If you haven’t already, sit down soon with your benefits and finance team to discuss your plans for addressing the Act’s impact on your business.
Here are four things to know before you get started.
Estimating Affordable Care Costs is Complicated
You will almost certainly pay more. But how much?
Many companies are feeling the increases already, due primarily to a provision mandating that dependents can stay on a parents’ coverage until age 26. Some employers, and their plan providers, are offsetting the additional cost with higher employee premiums and/or higher co-pays for plan participants.
Employers must also pay a $63 annual tax for each worker covered, and the law has also added $100 billion in premium taxes that insurers must pay over the next ten years. Those costs will be passed on to businesses and individual policy holders.
Starting in 2018, a 40% “Cadillac Tax” would be imposed on insurance companies providing plans valued at more than $10,200 (individuals) and $27,500 (families).
To sum up, it could be a couple years before the actual cost to your small business is understood and predictable.
But interestingly, though, a survey by the International Federation of Employee Benefit Plans shows that most plan administrators believe that their overall costs will increase by only about 5% after the Affordable Care becomes law.
Bye-bye Flex Spending?
Popular flexible spending accounts, where an employee sets aside a percentage of earnings to pay for health-related expenses on a pre-tax basis, will be impacted by the Affordable Care Act.
Currently, the law allows you to put $5,000 annually in the tax-advantaged account. Under the provisions of Affordable Care, the number drops to $2,500.
This potentially exposes more of an employee’s pay to taxation, but might also have the effect of making the plans less appealing to many workers.
If you currently offer flex spending, consider taking an informal poll to see who’s still interested under the new, lower limits. It may not be worth the administrative cost.
It May Cost Less to Opt-Out
The Affordable Care Act’s provision that goes into effect on January 1, 2014 requires businesses with 50 or more full-time workers to provide health care coverage for employees. (A full-time worker is being defined as anyone who works more than 30 hours in a month.)
But what if your company elects to not participate?
Well, currently, the Act provides for a $2,000 penalty for each full-time worker above the 50 employee threshold.
A bottom-line analysis might reveal that it’s less expensive to just pay the $2,000 fine per employee. Other employers have changed their hiring and employee retention policies to make sure they keep head-count under 50.
But tread very carefully here.
Some of the companies – particularly those that have cut worker hours – have experienced serious public relations problems after their actions were made public. The moves probably didn’t do much for employee morale, either.
Consider all your options carefully. Higher employee premiums or other cost-sharing measures might be preferable to just cutting the plan altogether.
There are Affordable Care Act Resources
You don’t have to go it alone.
Many industry trade groups, as well as local and regional business associations, have done much of the heavy lifting to help their members understand the ins and outs of the Affordable Care Act.
In addition, online resources are abundant – just make sure you’re reading current information.
The National Federation of Independent Businesses, NFIB.com and U.S. Chamber of Commerce, USChamber.com have both written extensively on the Act’s potential impact on business, but be aware that both organizations lobbied heavily against its implementation.
Publications on The Affordable Care Act are easy to find. One quick read is The ObamaCare Handbook: Understanding the Basics of the Patient Protection and Affordable Care Act of 2010.
Available in Kindle format, the book explains to the small business owner potential requirements, fees, and penalties associated with the Affordable Care Act. It also includes assessment tools that you can work through to make reasonable estimates regarding the Act’s financial impact on your company.
Image courtesy Haitham Altalah
MP Star Financial can offer solutions to you cash flow management problems. Call for more information. (800) 833-3765, extension 150.