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    4 Things Business Owners Need to Know about ACA for 2016

    Posted by Sylvia Lagerquist, CPA

    4 Things Business Owners Need to Know about ACA for 2016

    The Affordable Care Act (ACA), also known as Obamacare, originally came into effect on January 1, 2014. However, the law contains many provisions that roll out or expand over a series of years. In addition, both Congress and the Obama administration have continued to modify, amend and adjust the law and its provisions.

    With all of these changes, the greatest challenge for many business owners is simply staying on top of the law’s requirements, as well as its options and opportunities. Here are four things you should know about the Affordable Care Act for 2016:

    1. Changes to the Employer Mandate

    The ACA is organized around key mandates that apply to both employers and individuals. On the employer side, the ACA requires employers who meet certain requirements to offer qualified health insurance or face penalties. These penalties range between $2,000 and $3,000 per employee, so the cost of noncompliance can quickly skyrocket.

    Under the employer mandate, businesses are required to provide full-time employees (FTEs) as well as their children (up to age 26) with health insurance options that cover at least 60% of total allowable medical costs. Employers must also provide a subsidy to employees to make up any difference if the cost of premiums exceeds 9.5% of a an FTE’s modified adjusted gross income (MAGI). The employer mandate has gradually expanded from 2014 through 2015. As of 2016, the mandate will apply as follows:

    • Employers with 100 or more FTEs must offer health insurance overage to at least 95% of their FTEs (up from 70% in 2015).
    • Employers with 50 to 99 FTEs must offer the same level of coverage.
    • Employers with 1-49 FTEs remain exempt.

    Note: Employees who work 29 or fewer hours per week are defined as part-time under the ACA and are not included in the employer mandate.

    2. Changes to the Individual Mandate

    At its core, the ACA’s goal is to ensure that every American is covered by health insurance. As a result, the law includes penalties that can be levied against individual taxpayers who choose not to enroll in health insurance.

    The law uses a formula based on an individual’s modified adjusted gross income (MAGI) to determine and assess a penalty. As of 2016, this penalty rises sharply, to the greater of $695 in fines or 2.5% of MAGI, which for a family could actually reach $2,085. In 2017, the penalty will rise with the rate of inflation, but the challenge is that this may be more than the cost of even lower-tier coverage through an ACA exchange. For example, in 2015 the average consumer paid $3,700 per year for non-subsidized Silver tier ACA coverage.

    Employers who do not offer health coverage and who expect their employees to pursue individual coverage through an ACA exchange would do well to learn about the various subsidies offered under the ACA so that employees can become informed about the best way to achieve eligibility for subsidized coverage.

    In addition, you should also learn about subsidies that may be applicable to your small business through ACA, and consider pursuing coverage for your employees using SHOP (Small Business Health Options Program).

    3. Changes to Insurance Policy Provisions & Costs

    As of 2016, the ACA also requires insurance plans offered in small-group healthcare markets to match the provisions of other coverage previously offered through ACA.

    Put another way, just as companies with 50 or more employees will be coming under the ACA mandate, insurance carriers will be required to only offer policies to those companies that includes provisions such as caps on out-of-pocket costs, elimination of pre-existing condition exclusions and rate setting based upon a single risk pool.

    This change will now apply ACA standards to all policies applicable for employers with 1-100 employees, while the employer mandate will be applicable for all employers with 50 or more employees. Analysts are predicting an average increase of 18% for affected policies, which may actually drive more covered employers out of the exchanges or lead some companies to switch FTEs to part-time status in order to avoid falling under the expanded ACA mandates.

    4. Changes to Open Enrollment and SHOP

    The individual coverage open enrollment period for 2016 begins on November 1, 2015 and concludes on January 31, 2016. That means that individuals and families can select and enroll in an ACA plan immediately in order to have coverage for 2016 (in order to have new coverage effective on January 1, 2016 you must enroll by December 15, 2015).

    In addition, small businesses with 50 or fewer employees can utilize the Small Business Health Options Program (SHOP) online marketplace to select cost-effective employee coverage, and those with 25 or fewer employees may also be eligible for subsidies to help offset some of the cost associated with providing health insurance for their employees. Keep in mind that enrollment periods and provisions are different for employers than they are for individuals.

    If you’re wondering how to best apply the mandates and options presented by ACA to your business, consult with your CPA and your insurance broker today to learn more about the tax implications and financial strategies you should consider when preparing to offer or change health insurance strategies in your business.

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    Image Credit: thecampbells (Flickr @ Creative Commons)

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