'13 Health Care Year of Determination
Editor's Note: The following news release comes from the National Association of RV Parks and Campgrounds (ARVC).
Regardless of what you think about the Patient Protection and Affordable Care Act (ACA), which was signed by President Obama on March 23, 2010, there is no question any longer that it is the law of the land. The U.S. Supreme Court has upheld its constitutionality. And now, all the deadlines and requirements related to health care and health care insurance imbedded within the law are poised to kick in.
For America’s small business community, which includes nearly all of ARVC’s approximately 3,000 members, calendar year 2013 is being called by some as the “year of determination.”
That is, businesses must determine whether they are “small” or “large” under the ACA, and this determination in turn generally depends on the number of full-time employees.
In 2014, employers will be expected to know whether or not they are “large” or “small” so that they can comply with the law. This article focuses mostly on the ramifications for “small” businesses since most ARVC members fall into that category.
Generally, “small” businesses are those with fewer than 50 full-time employees (FTEs). FTEs are individuals who worked an average of 30 hours per week (130 total monthly hours). Part-time employees’ hours are converted into FTE employees to determine employer size. For example, if six employees worked five hours per week, they would count as if the company had one additional FTE.
It should be noted that under ACA, an employer is not considered “large” if it has 50 FTEs for 120 days or less during the calendar year. The Internal Revenue Service and Department of Labor are expected to provide additional guidance on determining seasonal workers. Through 2014, employers are permitted to make a “reasonable, good faith interpretation” of the term “seasonal employee.”
The ACA does not require small businesses as defined under ACA to provide health care insurance. However, beginning on Jan. 1, 2014, small businesses with 50 or fewer FTEs will be able to purchase coverage through the Small Business Health Options Program (SHOP) exchanges.
These exchanges are competitive marketplaces where small businesses can find health coverage from a selection of providers, and pool their risks and thereby lower their administrative costs. Open enrollment through SHOP exchanges begins on October 1, 2013. Employers with up to 100 FTEs will be able to participate in SHOP beginning in 2016. States may limit the small business definition to no more than 50 FTEs until 2016.
Furthermore, the ACA offers tax credits for eligible small businesses that choose to provide health insurance for their employees. To qualify for a small business tax credit of up to 35 percent (25 percent for non-profits), the business must:
- Have fewer than 25 FTEs.
- Pay average annual wages of less than $50,000.
- Contribute 50% or more toward employee health insurance premiums.
In 2014, the tax credit increases to 50 percent (35 percent for non-profits), and is available to qualified small businesses which participate in the SHOP exchanges. Small businesses can claim the credit through 2013 and for two additional years beginning in 2014.
In contrast, beginning in 2014, businesses with 50 or more FTEs (or full-time equivalents) that do not offer affordable health insurance that provides a minimum level of coverage to substantially all of their FTEs (and their dependents) may be subject to an employer shared responsibility payment if at least one of their FTEs receives a premium tax credit to purchase coverage in an insurance marketplace or exchange.
If a business is at or near this threshold level of FTEs, it is important to understand how the rules may apply and how the shared responsibility payments could be triggered.
Stated another way (from the perspective of “small” businesses under ACA), employers with fewer than 50 FTEs are exempt from the new employer shared responsibility policies, and they do not have to pay an assessment if their employees receive tax credits through an exchange.
Finally, since some ARVC members are self-employed and may have no employees, it is important to note that the self- employed will be able to purchase health insurance through individual exchanges beginning on Jan. 1, 2014.