In this article, we want to provide a summary of the often discussed but misunderstood Obamacare Employer Mandate. In the Affordable Care Act (ACA), otherwise known as Obamacare, there is an Individual Mandate, which has requirements for individuals, and there is the Employer mandate, which has requirements for businesses (employers).
Employer Mandate Summary
The employer mandate requires businesses to provide health insurance for their employers. Specifically, businesses with over 50 full time employees must provide health insurance for their employees or face a tax penalty of $2,000 per employee. Small businesses with 50 or less employees are not subject to the mandate and WILL NOT pay a fine for not providing health insurance to their employees. In addition, small businesses with less than 25 employees can get tax credits of up to 50% of their employee premium costs to purchase insurance via their State’s Health Insurance Marketplace.
How Many Businesses are Directly Affected By the Employer Mandate?
According to the census bureau, only 3.6% of businesses in the United States employ 50 or more workers. That’s 210,000 business out of the 5.7 million surveyed by the Census Bureau in 2010. However, of the businesses that have 50 or more employees, 94% of those with 50 – 199 employees already provide healthcare coverage to their employees, while 98% businesses with 200 or more employees already offer healthcare coverage to their employees. Therefore the individual mandate and penalty will directly affect about 10,000 businesses out of the 5.7 million surveyed by the Census bureau. So, as you can see, the mandate is directed at only a very small fraction of businesses.
Employer Mandate Delay
The employer mandate was originally set to begin in January 2014, but the Obama Administration has delayed it’s implementation by a year, which mean that the employer mandate and penalty will begin to be applied beginning in January 2015.
Small business and the Employer Mandate
The Affordable Care Act affects all businesses. Under the law, only employers with more than 50 full time employees are required to provide health insurance. However, there are provision that affects businesses of all sizes. For the purposes of the law, businesses are divided into three (3) categories. We look at each business category below and the elements of Obamacare that apply.
1. Self Employed
Under Obamacare, you are considered self-employed if you run an income-generating business with no employees. You’re still classified as self-employed even if you hire independent contractors to do some work. If you call under this category, you have to purchase insurance through your state’s healthcare exchange. Starting October 1, 2013, you can use the Marketplace to find health coverage that fits your budget and meets your needs. If you currently have individual insurance that you purchased yourself on the open market (not the kind you get through an employer), you may be able to change to a Marketplace plan. Click here to see our detailed post on Obamacare for the Self Employed.
2. Small Business with 50 Employees or Less
If you are a small business and have 50 or fewer employees, then you are required under the ACA to inform your employees about their health insurance options. Your employees can either choose to participate in your employer provided health plan or they can purchase insurance directly through the health insurance marketplace in their state of residence.
If you are a small businesses with 25 or fewer employees and an average wage of $50,000, you can apply and receive tax credits to help you cover some of the cost of providing health insurance for your employees (which can be purchased through your state’s health insurance marketplace). Click here to learn more or watch the video below for a detailed explanation.
3. Businesses with more than 50 Employees
Businesses with more than 50 employees are required to offer health insurance to their employees or face a penalty of $2,000 per employee with the first 30 employees exempted. If a company with 60 employees is subject to the penalty, its annual liability would be $60,000 (60 employees: 30 employees x $2,000 = $60,000). For a detailed look at the employer mandate penalty and what it means for businesses, click here.
As stated above, the employer mandate has been delayed and will begin in January 2015.