Health Care Compliance for Small Businesses

The Affordable Care Act (aka Obamacare) was passed and signed into law more than five years ago, and it is still not fully implemented. In 2016, new requirements will go into place that will affect all firms with 50 or more full-time employees. This is commonly known as the “employer mandate”, and its full implementation is likely to significantly alter the health insurance market going forward. ACA Info

Under Section 6056 of the Internal Revenue Code, “applicable large employers” (now defined as firms with 50 or more full-time employees) must report information about the health coverage of each employee to the IRS. Full-time as defined by the IRS is generally any employee that averages 30 hours of work per week. In addition to reporting requirements, applicable large employers must provide “minimum essential” health coverage, or pay a penalty for each non-covered full-time employee.

Unintended Consequences: There are two consequences of the employer mandate that are seen by many as adverse to the economy:

  1. There are a significant amount of workers across a wide range of industries that now work an average of 29.5 hours or less per week.
  2. Many firms that are at or near the 50 full-time employee mark are choosing to outsource, hire temps, or simply operate with a workforce of 49 or less employees in order to avoid the aforementioned requirements.

Controlling Health Care Costs: Though some companies are taking advantage of loopholes to avoid ACA compliance, others are choosing to continue offering health insurance. This makes good sense in many industries where you need to offer good benefits to attract top talent. Employers who are offering health insurance are largely moving away from high value (a.k.a. “Cadillac”) health plans to avoid the 20% excise tax. In many cases, these high value plans are being replaced by high deductible health plans combined with a health savings account (HSA) component.

Though most consumers are upset about the vanishing Cadillac plans, HSAs are a popular alternative, because they give the employee the opportunity to have their own savings account they can contribute to tax free and use to pay for incidental health expenses (such as doctor visits). Employers can also contribute money to an HSA to make it an even more attractive benefit for their employees.

In 2016, most provisions of the ACA will have been fully implemented. Compliance requirements impact millions of businesses in various ways, with no ‘one size fits all’ solution. The best way to ensure you have the right health care compliance strategy in place is to speak with your small business accountant and go over the specifics of your business. Your accountant can let you know which requirements apply to your company and advise you on what steps to take to ensure your business remains in the best possible financial position.

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