The healthcare mandate will require that all Californians have health insurance as of January 2014, with some exceptions. Many businesses are rightfully concerned about how this will affect them. The answer essentially comes down to the size of the business.
Impact on Businesses with Fewer than 50 Full-Time Employees
Small businesses with less than 50 employees will not be required to provide employees with health insurance. They may nevertheless opt to do so, either independently or through the Small Business Health Insurance Options program (SHOP), part of Covered California, the state’s health insurance exchange. SHOP could help reduce the cost of coverage for both the employer and employees.
For small businesses who decide to offer employees health coverage, it may or may not be optimal for a business to cancel its existing policy in favor of a plan within the exchange. This is because employees who make more than 400% of the federal poverty level (FPL) will not be eligible for subsidies to help pay for the cost of coverage within the exchange; and since the purpose of the exchange is to reduce the cost of insurance, it may be more beneficial for employees to keep their employer-sponsored plan.
Impact on Businesses with 50+ Full-Time Employees
The law gets more complicated for businesses with more than 50 full-time employees (those who work more than 30 hours per week on average, according to Covered California).
Under the mandate, these businesses will be required to offer health insurance to their employees or pay a penalty of $2,000 per employee. Depending on the cost of insurance per year per employee, it may or may not be in the company’s best financial interest to simply pay the penalty and advise employees to seek coverage through the exchange.
An important consideration in this regard is whether employees will qualify for a subsidy to help pay for the cost of coverage through the exchange. Employees who make more than 400% of the FPL will not qualify and would require a salary increase in order to make up for the loss of benefits at work. Offering employees health insurance may be more beneficial to the employer, since health plans are tax-deductible, and the fact that health insurance costs are not taxable income is an advantage for employees as well.
Full-time employees offered coverage through their employer will only qualify for a subsidy under the exchange if they make less than 400% of the FPL, if their employer doesn’t offer coverage, or if their employer-sponsored is deemed unaffordable, costing more than 9.5% of the employee’s income. It’s important to note that employers with 50 or more full-time employees could be penalized $3,000 per employee for offering coverage that exceeds 9.5% of an employee’s income.
This is a basic overview of the future impact to businesses of the health care mandate. It is essential for business owners to seek the assistance of an experienced insurance agent to help them navigate their options under the new law.
Benefit Packages has over 20 years of industry expertise and will be Exchange Certified and positioned to help you find comprehensive California health insurance through reputable carriers like Anthem Blue Cross of California at the best rates. Visit our website for more information or call us toll free at 1-800-356-3615.