What Small Businesses Need to Know About the Employer Mandate

In January 2016, the marketplace for Covered California for Small Business expanded to include employers with 100 or fewer full-time equivalent (FTE) employees. Additionally, the Affordable Care Act required applicable large employers, or employers with 50 or more FTE employees, to offer affordable health insurance that met a minimum standard or pay a “shared responsibility” penalty. Understanding whether you are required to offer health coverage is important for you to know as a business owner and can be confusing.

You might ask:

• What’s an FTE employee and how do I calculate how many I have?

• How do I determine whether the law requires me to offer health coverage?

• What is my “shared responsibility” payment if I do not offer coverage?

• How do I know if my company is eligible for Covered California for Small Business?

Covered California for Small Business is here to help. Recently, the IRS released multiple tools to assist employers in determining FTE employee counts, how to determine if you are an applicable large employer, and what your shared responsibility would be for not offering Affordable Care Act-compliant health benefits. Check out the following resources for more information:

2016 Employer Shared Responsibility Provision Estimator, Including FTE Calculator
IRS ACA Estimator Tools for Individuals and Employers

View the IRS video Employer Shared Responsibility Payments to find out if you are subject to the employer shared responsibility provision of the health care law.

View the IRS video "Are You an Applicable Large Employer?" to see what you need to know if you are an applicable large employer under the health care law.

To learn more about offering Affordable Care Act-compliant health benefits through Covered California for Small Business, visit CoveredCA.com/ForSmallBusiness or call us at (844) 332-8384.

Starting in 2016, employers with 50 or more employees have new reporting requirements as part of the employer mandate. That reporting requirement is to complete one form 1095-C for each employee. The 1095-C form is a new tax form employers use to report their offers of insurance for the previous year. Specifically, the 1095-C form provides details about the covered services offered to the employee, the lowest-cost premium available to the employee, and the months of the year when coverage was available. The Internal Revenue Service (IRS) uses these forms, along with the 1094-C Transmittal form, to confirm that all businesses are complying with the mandate to offer affordable minimum essential health coverage. All employees eligible for coverage should get a 1095-C, regardless of whether they actually participate in the employer’s health insurance plan.

Additionally, employees who are offered affordable minimum essential coverage by their employers are not eligible for premium tax credits if they purchase a plan through Covered California. The IRS uses the information on form 1095-C to confirm that no employees who have been offered affordable minimum essential coverage by their employer are receiving tax subsidies to purchase coverage through Covered California.

Get more information on the IRS reporting forms.

The IRS will contact employers directly to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made.

An employer may appeal an employer notice if it asserts that it offers affordable minimum essential coverage to employees or that its employee is enrolled in employer coverage and therefore ineligible for premium tax credits. Employers have 90 days from the date of the notice it receives from Covered California to request an appeal. Employer appeals will be handled by the IRS.

The definition of “small employer” is expanding. Due to changes in state law, starting in 2016, the definition of “small employer” is expanded to include businesses with 50 to 100 full-time equivalent (FTE) employees. This means that Covered California for Small Business is available to small businesses with up to 100 FTE employees, whereas it had not been before. Through Covered California for Small Business, small employers can shop for coverage for their employees among multiple carriers across multiple metal tiers (coverage levels including Bronze, Silver, Gold and Platinum). Covered California also relieves employers of administrative burden by handling much of the payment distribution to health plans across carriers and coverage levels. Federal tax credits are available to those businesses that qualify.

New coverage requirements for large businesses. Starting in 2016, insurance companies offering products in the large group market are prohibited from marketing, offering, amending or renewing a large group plan contract or policy that provides a minimum value of less than 60 percent. Large businesses purchasing a health insurance plan for their employees should confirm that the plan provides no less than 60 percent minimum value.

Small business owners with fewer than 50 full-time employees are not required to offer health care coverage to their employees. However, you should know that if a small business with fewer than 50 full-time employees does offer coverage, then that coverage must comply with the requirements of the ACA. Such requirements include coverage of 10 essential health benefits, no lifetime or annual benefit maximums, and adherence to consumer protections built into the ACA.

Additionally, small businesses that provide healthcare coverage through Covered California for Small Business may be eligible for tax credits if:

• They have fewer than 25 FTE employees for the tax year;

• The average annual wages paid are less than $50,000 per employee; and,

• The employer pays at least 50 percent of the employee's premium cost.

Small businesses have the option to offer dependent coverage through Covered California for Small Business. In the event that employers do not offer coverage for their employees’ dependents, employees may be able to purchase health insurance for their dependents through Covered California. However, if a business offers coverage for employees’ dependents, those dependents become ineligible to receive financial help for a Covered California health insurance plan.

For additional information on the employer mandate, please visit: https://www.irs.gov/affordable-care-act/employers/affordable-care-act-tax-provisions-for-small-employers

Talk to Covered California for Small Business, your health or dental plan representative, or your insurance agent to discuss your options.

For more information on Covered California for Small Business, visit: www.CoveredCA.com/ForSmallBusiness or call: (844) 332-8384.

For additional information on the employer mandate, please visit: https://www.irs.gov/Affordable-Care-Act/Employers/Employer-Shared-Responsibility-Provisions