There’s lots of new lingo built into the Affordable Care Act (ACA) health care reform law. Especially if you work for a small business, understanding what these six terms mean can help you make better decisions about the health benefits you may (or may not) want to offer your employees.
1. Employer shared responsibility
Although employers are not required to provide health coverage to their employees under the ACA, employers of a certain size will be subject to the employer shared responsibility provision of the law. It’s sometimes called the “employer mandate” or “play or pay.”
Beginning Jan. 1, 2014, employers with at least 50 full-time or full-time equivalent (FTE) employees that do not offer health benefits may be subject to a penalty. A full-time employee is generally one who is employed an average of 30 or more hours per week. Businesses with fewer than 50 full-time or FTE employees are generally not affected by these provisions.
Read the IRS Q&A about this subject.
2. Individual shared responsibility
The ACA’s individual shared responsibility provision applies to individuals who do not receive employer-provided health benefits.
Beginning Jan. 1, 2014, this “individual mandate” requires everyone to have basic health insurance coverage (known as minimum essential coverage) unless they qualify for an exemption. Otherwise, they must pay a tax penalty starting in 2015.
Learn more in the IRS Q&A on the topic.
3. Affordable Insurance Exchange
Affordable Insurance Exchanges will function as state-based, competitive insurance marketplaces where individuals and small businesses can purchase affordable, qualified health benefit plans.
The marketplace for small employers, known as the Small Business Health Options Program (SHOP), will open in all states on Jan. 1, 2014. Enrollment begins Oct. 1, 2013. To get the latest updates on enrollment, sign up for email and text alerts.
4. Essential health benefits
The ACA ensures that health plans offered in the individual and small group markets, both inside and outside of the health insurance exchanges, provide a comprehensive package of items and services, known as essential health benefits.
Essential health benefits must include services within at least 10 core categories, including emergency services, maternity and newborn care, prescription drugs, and preventive and wellness services.
Get more information on essential benefits at www.healthcare.gov.
5. Health care tax credits
Although the ACA does not require employers to provide health insurance, it does offer tax credits for eligible small businesses that choose to provide insurance to their employees for the first time, or maintain the coverage they already have.
To qualify for a small business health care tax credit of up to 35%, you must have fewer than 25 FTE employees, pay average annual wages below $50,000 and contribute 50% or more toward your employees’ self-only health insurance premiums.
In 2014, this tax credit goes up to 50% and is available to qualified small businesses that purchase coverage in the SHOP marketplace.
6. Wellness programs
Ais defined as a program intended to improve and promote health and fitness.
Wellness programs are typically offered through the workplace, although insurance plans can offer them directly to enrollees.
Under the ACA, employers and insurance plans may offer employees premium discounts, cash rewards, gym memberships and other incentives to participate.
In addition, the law creates other incentives to promote wellness programs and encourage opportunities to support healthier workplaces.
Learn more at www.healthcare.gov.
Final note: Find more information on how the ACA affects small business.
Check out HR Specialist’s ongoing coverage of health care reform compliance issues.
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