Your question is a common one these days. It may be a subtle distinction but I'm a firm believer in being clear on our terminology. Many employers and employees think that the Affordable Care Act (ObamaCare) legally requires employers to provide health insurance to their employees. This is not the case. In fact, ObamaCare may possibly have the result of reducing the number of employers who provide health insurance for their employees. Only time will tell on this issue.
What the Affordable Care Act does is provide a mixture of incentives and penalties to employers regarding their choice as to whether to offer group health insurance to their employees. At the current time you need to subdivide the employer marketplace into three different segments and understand how the law applies to each one in the coming years.
1) The small group market (2 to 49 employees) - for companies of this size there is a possible incentive in the form of a tax credit to encourage employers to offer health insurance to their employees. THERE ARE NO TAX PENALTIES FOR EMPLOYERS IN THIS SIZE RANGE WHO DO NOT OFFER GROUP HEALTH INSURANCE TO THEIR EMPLOYEES. As with many aspects of the Affordable Care Act, even the availability and value of the tax credit is confusing and ends up being of little or no value to most small employers. First, the employer will have to purchase group health coverage through the SHOP program of the government health marketplace in their state in order to qualify for the tax credit of 50% of what the employer contributes towards employee coverage. This may significantly reduce the employer's options. For instance, here in Tennessee, only one group health insurance carrier has chosen to participate in the SHOP program in 2014. So your choice is Blue Cross/Blue Shield in that case. The employer may find significantly less expensive group plan options from other insurance companies outside of the SHOP program. Next, the tax credit really only applies to groups of up to 24 employees and actually maxes out for groups with 10 or fewer employees, plus your average workforce wage has to be below $50,000/year. And, the tax credit can only be claimed for two consecutive tax years. For these reasons the tax "incentives" provide little real incentive for most small employers to use the SHOP program and the SHOP program has done little to increase competition in most states.
2) Groups with 50 to 99 employees - originally groups in this size range were to be subject to the Employer Mandate on January 1, 2014. However, the Obama administration delayed implementation of the employer mandate for groups of this size until January 1, 2016. So, while there are some issues employers in this size range need to be aware of and planning for, in most ways the status quo remains unchanged for employers in this size range.
3) Employers with 100 or more Full Time/Full Time Equivalent employees - for employers who fall into this category the Employer Mandate provision was delayed only until January 1, 2015. After that date employers in this size range who offer no health insurance to their employees will be subject to a tax penalty of $2000 per employee if at least one of their employees purchases individual health insurance through the government health insurance marketplace and receives a premium tax subsidy. A second tax penalty situation is created for employers who offer health insurance to their employees which is deemed unaffordable under the terms of the Affordable Care Act (the cost to the employee must exceed 9.5% of their W2 income). In this circumstance the employer is subject to a tax penalty of $3000 for each employee who enrolls for individual coverage in the government health insurance marketplace and receives a premium tax subsidy. To make the tax penalties a bit more punitive, they will not be a deductible business expense.
At first glance these potential tax penalties might appear to many to be a strong incentive for larger employers to provide health insurance to their employees. But, in practical terms, the tax penalties are often far less expensive than providing group health insurance especially in light of the additional coverage requirements of the Affordable Care Act that are driving health insurance rates up even further.
So, no employer has to provide health insurance to their employees. And for larger employers it is simply a decision as to whether to bear the cost of providing group health insurance or paying a tax penalty.
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
No one is required to offer health insurance, but employers are strongly encouraged to offer it as a way of attracting people to come work for them.
Depending on how many employees there are for a given company, the employer may be subject to employer shared responsibility payments if they don't offer group coverage and meet enrollment requirements.
Employers also often offer group health insurance because they can get certain tax deductions and tax credits for doing so and enrolling employees.
If you want to look into setting up a group health plan to offer your employees (or want to review your existing coverage to see if something better is available), you want to work with an experienced health insurance broker. There's many moving parts to group coverage. We have in-depth knowledge of the products available and can help design a policy that is suitable to your needs, your budget, and will offer great coverage to your staff. Please let me know if I can be of assistance. Thanks very much.
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What the Affordable Care Act does is provide a mixture of incentives and penalties to employers regarding their choice as to whether to offer group health insurance to their employees. At the current time you need to subdivide the employer marketplace into three different segments and understand how the law applies to each one in the coming years.
1) The small group market (2 to 49 employees) - for companies of this size there is a possible incentive in the form of a tax credit to encourage employers to offer health insurance to their employees. THERE ARE NO TAX PENALTIES FOR EMPLOYERS IN THIS SIZE RANGE WHO DO NOT OFFER GROUP HEALTH INSURANCE TO THEIR EMPLOYEES. As with many aspects of the Affordable Care Act, even the availability and value of the tax credit is confusing and ends up being of little or no value to most small employers. First, the employer will have to purchase group health coverage through the SHOP program of the government health marketplace in their state in order to qualify for the tax credit of 50% of what the employer contributes towards employee coverage. This may significantly reduce the employer's options. For instance, here in Tennessee, only one group health insurance carrier has chosen to participate in the SHOP program in 2014. So your choice is Blue Cross/Blue Shield in that case. The employer may find significantly less expensive group plan options from other insurance companies outside of the SHOP program. Next, the tax credit really only applies to groups of up to 24 employees and actually maxes out for groups with 10 or fewer employees, plus your average workforce wage has to be below $50,000/year. And, the tax credit can only be claimed for two consecutive tax years. For these reasons the tax "incentives" provide little real incentive for most small employers to use the SHOP program and the SHOP program has done little to increase competition in most states.
2) Groups with 50 to 99 employees - originally groups in this size range were to be subject to the Employer Mandate on January 1, 2014. However, the Obama administration delayed implementation of the employer mandate for groups of this size until January 1, 2016. So, while there are some issues employers in this size range need to be aware of and planning for, in most ways the status quo remains unchanged for employers in this size range.
3) Employers with 100 or more Full Time/Full Time Equivalent employees - for employers who fall into this category the Employer Mandate provision was delayed only until January 1, 2015. After that date employers in this size range who offer no health insurance to their employees will be subject to a tax penalty of $2000 per employee if at least one of their employees purchases individual health insurance through the government health insurance marketplace and receives a premium tax subsidy. A second tax penalty situation is created for employers who offer health insurance to their employees which is deemed unaffordable under the terms of the Affordable Care Act (the cost to the employee must exceed 9.5% of their W2 income). In this circumstance the employer is subject to a tax penalty of $3000 for each employee who enrolls for individual coverage in the government health insurance marketplace and receives a premium tax subsidy. To make the tax penalties a bit more punitive, they will not be a deductible business expense.
At first glance these potential tax penalties might appear to many to be a strong incentive for larger employers to provide health insurance to their employees. But, in practical terms, the tax penalties are often far less expensive than providing group health insurance especially in light of the additional coverage requirements of the Affordable Care Act that are driving health insurance rates up even further.
So, no employer has to provide health insurance to their employees. And for larger employers it is simply a decision as to whether to bear the cost of providing group health insurance or paying a tax penalty.
Depending on how many employees there are for a given company, the employer may be subject to employer shared responsibility payments if they don't offer group coverage and meet enrollment requirements.
Employers also often offer group health insurance because they can get certain tax deductions and tax credits for doing so and enrolling employees.
If you want to look into setting up a group health plan to offer your employees (or want to review your existing coverage to see if something better is available), you want to work with an experienced health insurance broker. There's many moving parts to group coverage. We have in-depth knowledge of the products available and can help design a policy that is suitable to your needs, your budget, and will offer great coverage to your staff. Please let me know if I can be of assistance. Thanks very much.