Q. I’m uninsured. Do I have to buy health insurance?
A. Most Americans are required to have health insurance, or pay a tax penalty if they don't. This ACA rule is called the “Individual Mandate” or “Individual Shared Responsibility Fee” and started in 2014. Coverage can include job-based health insurance, individual health insurance, or insurance through a government program such as Medicaid or Medicare. Read more about the Individual Mandate.
Q. What is the penalty if I don’t have health insurance coverage?
A. The penalty for not having “minimum essential coverage” is either a flat fee or a percentage of household income, whichever is greater. The penalty increases over the first three years. Read more about the individual fee.
Q. Is anyone exempt from the requirement to have health insurance?
A. Yes. You may not have to pay the Individual Shared Responsibility Fee if you are uninsured, and:
Are required to pay more than 8% of your household income for the lowest cost bronze plan.
Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.
Had one gap in coverage for less than three consecutive months during the year.
Won’t file a tax return because your income is below the tax filing threshold. In 2013, the tax filing threshold was $10,000 for individuals and $20,000 for a couple.
Are unable to qualify for Medicaid because your state has chosen not to expand the program.
Participate in a health care sharing ministry or are a member of a recognized religious sect with objections to health insurance.
Are a member of a federally recognized Indian tribe.
Qualify for a hardship exemption.
Q. What are the Health Insurance Marketplaces?
A. The Health Insurance Marketplaces are websites where you can shop, compare, and enroll in an individual health insurance plan. Each state has a Marketplace that is either run by the state (ex: CoveredCA.com), or the federal government (HealthCare.gov). The Marketplaces are intended to make shopping for health insurance easier and give you access to the premium tax credits. Read more about the Marketplaces here.
Q. What has changed about individual health insurance?
A. While individual health insurance plans are not new, Obamacare created three new advantages that make individual health insurance just as good – if not better – than traditional group health insurance. The new advantages are:
Coverage for a pre-existing condition (you cannot be denied coverage or charged more because of a medical condition).
Coverage of essential health benefits (a core set of health benefits and services).
Discounts, via the premium tax credits (which lower the cost of premiums for eligible individuals).
Q. How much does individual health insurance cost?
A. On average, individual health insurance costs less than group health insurance. The amount you will pay for health insurance depends on these factors:
Your location (state and county)
Your tobacco use
Eligibility for federal assistance (the premium tax credits or Medicaid)
The plan you select (carrier, network of providers, and level of coverage)
Q. When can I enroll in individual health insurance?
A. You can only enroll in individual health insurance during a specific annual open enrollment period, or during a special enrollment period. The purpose of these enrollment periods is to control costs - it keeps people from waiting until they get sick to purchase health insurance. If you do not purchase health insurance coverage during the annual open enrollment period, you will be unable to purchase coverage until the following year unless you qualify for a special enrollment period. Read more about Obamacare enrollment periods here.
Q. What are the premium tax credits?
A. As part of Obamacare, the federal government provides discounts for health insurance to eligible individuals and families. The discounts, called premium tax credits, help many people buy more affordable individual or family health insurance coverage through the new state Health Insurance Marketplaces.
The health insurance tax credits are "advanced-payable" meaning they can be applied toward your premium when you purchase health insurance coverage. Read more about Obamacare premium tax credits here.
As a small business owner, you likely have questions about how the ACA impacts your business. This section answers common questions about the requirement to offer health insurance, ACA reporting requirements, and new health insurance options for small businesses.
Q. Is our small business required to offer health insurance?
A. No. Small employers with fewer than 50 full-time-equivalent employees are not required to offer health insurance under the ACA. This is called the “Employer Mandate” or “Employer Shared Responsibility Fee" and it does not apply to small employers. Read more about the Obamacare Employer Mandate here.
Q. Will our business be penalized for not offering insurance to employees?
A. No. There are no tax penalties for employers with fewer than 50 full-time employees who do not offer health insurance.
Q. How do I calculate how many full-time equivalent (FTE) employees I have?
A. There are three steps to calculate how many FTE employees you have.
Step 1: Calculate the number of full-time employees. A full-time employee is defined as working on average at least 30 hours of service per week in a given month. How many full-time employees do you have?
Step 2: Factor in part-time employees. To calculate the full-time equivalent of part-time employees, add the number of hours worked by part-time employees in a given month and divide the total by 120. How many full-time equivalent part-time employees do you have?
Step 3: Add together the full-time employees and the full-time equivalent of the part-time employees. This is the number used to determine whether your business is an “applicable large employer.” If the sum is 50 or over you are an applicable large employer, and the Employer Mandate applies to your business.
Q. What if my business grows to more than 50 FTE employees?
A. Employers with more than 50 FTE employees who do not provide minimum, affordable health insurance will be required to pay a tax penalty; if/when an employee buys individual insurance and receives a premium tax credit or subsidy. However, this requirement for employers with 50-99 FTE employees does not go into effect until 2016. For larger employers with 100+ FTE, this requirement starts in 2015.
For 2015, the Employer Shared Responsibility Fee is equal to the number of full-time employees the employer employed for the month (minus 80) multiplied by 1/12 of $2,000, provided that at least one full-time employee receives a premium tax credit/subsidy for that month.
If you are a larger employer, click here to read more about calculating penalties for not offering health insurance.
Q. What are the new health benefits reporting requirements for small businesses?
A. Even though small businesses are exempt from the Employer Shared Responsibility Fees, there are new ACA reporting and compliance requirements that may (or may not) apply. These requirements depend on how many employees you have, and the type of health benefits you currently offer (if any). For example:
New W-2 Reporting: Employers with 250 or more W-2 Form Employees must report the cost of employer-sponsored group health coverage on employees’ W-2 Forms.
PCORI/CER Plan Fees: If you offer a Healthcare Reimbursement Plan (HRP) or another type of self-funded (or self-insured) health plan, you are required to pay the Patient-Centered Outcomes Research Institute (PCORI) fees.
If your small business currently offers health benefits, there may be additional reporting or plan changes you need to make to comply with the ACA.
Q. What is the small business health care tax credit and how do I know if our business is eligible?
A. Since 2010, tax credits have been available to qualifying small employers who offer a group health insurance plan. In 2014, the tax credit is worth up to 50% of your contribution toward employees' eligible premium costs (up to 35% for tax-exempt employers). The tax credit is highest for small businesses with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.
To be eligible for the small business health care tax credit you must:
Employ fewer than 25 full-time equivalent (FTE) employees, and
Pay an average wage of less than $50,000 a year per employee, and
Pay at least half (50%) of employee health insurance premiums (for full-time employees only), and
Purchase the health insurance plan through your state’s Small Business Health Options Program (SHOP) Marketplace; unless there are no SHOP plans offered in your region.
The credit is available to eligible employers for two consecutive tax years.
Q. What is the Small Business SHOP Marketplace?
A. As part of the ACA’s Health Insurance Marketplaces, there is an option for small businesses called the SHOP Marketplace. This is a new way for small employers with fewer than 50 employees (or fewer than 100 in some states) to purchase a traditional group health insurance plan.
If you want to access the small business tax credits you must purchase a SHOP plan (unless there are no SHOP plans available in your region).
However, if your small business hasn't been able to afford or qualify for group health insurance in the past, the SHOP doesn't offer much to change this.
Q. How is the ACA impacting the cost of small business health insurance?
A. Small businesses who offer group health insurance are likely to see premium increases because of the ACA. Why? New ACA taxes and fees are being passed on from insurance carriers to businesses and their employees, and there are new plan and coverage requirements that impact cost.
In fact, the Centers for Medicare & Medicaid Services (CMS) reports that 11 million small business employees (65%) will see health insurance premiums rate increases as a result of the Affordable Care Act (ACA).
But it’s not all the ACA. The cost of traditional group health insurance has been steadily climbing over the last decade, causing many small businesses to drop coverage or increasingly shift costs to employees.
According to a National Small Business Association 2014 survey, small business health insurance costs have nearly doubled since 2009, with 91% of small businesses reporting increases in their health plan at their most recent health insurance renewal.
It’s no surprise that fewer than half of all small businesses offer traditional group health insurance to employees; it no longer works for small businesses or their employees.
Q. What are the new health insurance options for small businesses?
A. In light of the ACA changes, and opportunities, the best health insurance option for small businesses is individual health insurance and a premium reimbursement program.
With this approach, your business gives employees a healthcare allowance to spend on individual health insurance - instead of purchasing a group health insurance plan.
Your business sets the healthcare allowance amounts, so you have full control of the cost of health benefits. Unlike group health insurance, there are no minimum contribution amounts and no minimum participation requirements.
Employees use their healthcare allowance to purchase an individual health plan of their choice and those eligible can access the premium tax credits.