As of January 1, 2015, businesses with 100 or more FTEs must provide health benefits to at least 70 percent of their full-time employees (95 percent by 2016) or pay a $2,000 annual penalty for each employee, excluding the first 30.
The deadline is later (January 1, 2016) for businesses with 51 to 99 FTEs.
Employers with 50 or fewer FTEs are not required to offer any coverage at all. These are the employers who are most likely to either utilize the SHOP exchange, or send their workers to the public exchanges, since doing so will not result in an ACA fine.
One final thing about FTEs: Only organizations with fewer than 25 of them can take advantage of the tax credit discussed earlier in this article. Unfortunately, calculating the FTE number for an employer is easier said than done.
“The employer mandate has been the hardest part of the law for businesses to understand,” says Solander. “Determining who is a full-time employee, for example, by reviewing the hours they have worked has been a challenge.”
For help in calculating your own FTE, click here.
You may also want to consult with your accountant. Solander cautions against instituting a program that gives employees after-tax payments that they are told to use to purchase insurance on the open market, including the state individual exchanges.
Such arrangements, sometimes called Employer Payment Plans, or Premium Reimbursement Arrangements, are deemed group health plans and are considered insufficient to satisfy the ACA’s minimum requirements for coverage. Because they violate the ACA they can trigger fines of $100 per day (or $36,000 per year) per employee.
Note that even businesses that have 50 or fewer FTEs, and which are therefore not subject to the employer mandate, should not engage in this kind of reimbursement program. Doing so may subject them to fines, because any health insurance program offered by any employer must satisfy ACA minimum requirements.
An alternative and legitimate arrangement is to increase the salary of employees with the idea that they can — but are not required to — use their additional income to buy their own insurance. Such an increase, though, would be subject to payroll taxes. (Additionally, businesses with 100 or more FTEs, and for that reason are subject to the employer mandate, would incur penalties because the increased salary on its own does not constitute health insurance coverage).
Benefit Worth Continued Offering
If the costs and complexities of an employer-provided health insurance program seem more than the benefit is worth, opting out is a possibility.
“Some employers are attempting to stay below the 50 FTE threshold so they are not mandated to offer coverage,” says Stich. In the IFEBP survey, one in 10 respondents said they had reduced hiring to stay below the threshold. Still others said they were reducing work hours so more employees fall into the part-time worker category for which health insurance need not be offered.
Despite those reports, the fact remains that most employers seem determined to continue offering what they deem a benefit that is valued by employees and thus vital to business success. In the IFEBP survey, some 93 percent of employers with 50 or fewer workers stated they “will likely” (or “definitely will”) continue to offer coverage.
They cited three key reasons: to retain current employees, to attract future talent, and to maintain or increase employee satisfaction and loyalty.
In contrast, fewer than 1 percent of survey respondents stated that they will definitely discontinue health insurance coverage.
“None of our employer members is planning to drop health insurance coverage,” says Boress of the Midwest Business Group on Health. “They all feel it is necessary to recruit and retain talent. When you compete for talent you will miss out if you don’t offer insurance equivalent to that of other employers. And you will not be able to keep the people you have.”
