Minimum Essential Coverage Under Obamacare: What is affordable for your employees

The Patient Protection and Affordable Care Act, also known as Obamacare, has been making a lot of people scratch their heads when it comes to understanding Minimum Essential Coverage and what role employers play in employee healthcare.  You might be confused as well, but don’t worry because you are not alone.  Many people, from business leaders to industry lawyers, are a bit baffled at the language used in the Act.  In this post we will hash out what the Act says and put it in laymen terms.

Minimum Essential Coverage is an affordable health insurance plan that a large employer offers to their employees.  An employer is considered large when they have 50 full time employees or a number of part time employees that work the equivalent hours of 50 full time employees.  You can read our previous post to determine whether or not you are a large employer affected by the Obamacare act.

Employees can apply for tax credits if they cannot afford their large employers health care coverage option.  Starting in January 1st, 2014, large employers with employees who receive the tax credits as a subsidy may be fined.  The IRS will be using these tax credits to keep track of which companies may be fined.  Before you start grabbing at the closest health insurance plan, you have to understand what counts as affordable as it is dependent from state to state and employee to employee.  Employee tax credit eligibility is dependent on a few factors, such as:

  • Whether or not the employee is 100%-400% above the poverty line, dependent on their family size.  The larger the family, the higher the poverty line is.  To give an example, in 2012 the poverty level was an annual income of $11,170 for one person and $23,050 for a family of four with the poverty line at 100%.  For one person at 400% above the poverty line is $44,680 and a family of four is $92,200 meaning, depending on what state you are in, people who make less than that could be eligible for tax credits
  • The employee is not a claimed dependent
  • If the employee is married and files a joint return

Over the next year each state is going to hammer out what levels they want to set, so keep an eye out in any state you operate in.

Many employees might get tax credits, but your health insurance offer might still be affordable, which means you won’t have to pay fines.  As long as your health care option does not cost more than 9.5% of your employee’s household income, then it is classified as affordable.   In this case, household income is defined as the modified adjusted gross income of the employee, spouse, and any dependents who must file a tax return because they brought in money, adjusted with any foreign income and tax exempt interest.

Minimum Essential Coverage is required to be offered by large employers to avoid fines.  Employees might receive tax credits for paying for health insurance, but that does not mean you will be fined as long as your Minimum Essential Coverage is affordable.  Affordability is defined on a state by state basis.  If you are a successful temporary staffing company you will probably be considered a large employer even if you have a lot of part time workers.  What is the best way to offer affordable health insurance to your temporary workers?  Stay tuned as the next post gives you an answer.For more on the finer points of the PPACA, click on any of the links below:

http://www.larsonallen.com/EFFECT/Breaking_Down_the_Insurance_Requirements_in_Health_Care_Reform.aspx

http://www.indusbusinessjournal.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=6F1EB7D8AD7F4FEBB86A2D0E8D989D97

http://www.lifehealthpro.com/2012/07/10/mercer-most-employers-havent-met-ppacas-2014-requi

And to fully understand the federal poverty levels, click here:

http://www.dhs.ri.gov/Portals/0/Uploads/Documents/Public/General%20DHS/FPL.pdf

 

 

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