By Sara Hopson, Marketing Manager
If you’re a startup entrepreneur in today’s world, it’s likely you’ve already done some thinking about your employee benefits strategy, either because you knew you had to, with the ACA employer mandate, or because it’s important to you to provide an awesome benefits package for your team (we’re hoping it’s a bit of both of those).
At Maxwell, we put companies first. We know it’s a scary world out there, and we’ve seen plenty of folks get lost in it. We’re here to help.
So, startups - the good news is, you’ve got options! In this brave new world of defined contributions, private exchanges, and the individual mandate, there are plenty of ways for your employees to get awesome coverage at an affordable price, for both you and them.
Here’s what you should know and some steps to take to make sure you’re ready, no matter your size or budget.
First things first: determine your company’s size in terms of full-time equivalent employees (FTEs).
If you have over 50 FTEs, and starting in 2015, the health coverage you offer is deemed unaffordable (or you offer no coverage), you may have to make a Shared Responsibility Payment of $2000-3000 per employee after the first 30. In other words, you must “Play or Pay”: provide health insurance to your employees or pay very high fees. “Affordable” means that the employee premium contribution isn’t more than 9.5% of the employee’s annual income.
If you have less than 50 FTEs, you aren’t required to provide health insurance to your employees.
How to calculate your number of FTEs (info from IRS.gov):
- An FTE is the equivalent of one person working full time for one year
- So, 8 hours a day X 5 days a week X 52 weeks a year = 2080 hours a year
- An FTE could be made up by one employee working full time, or two employees working part time (calculated as 4 hours per day, 5 days a week)
- You could also calculate it if you know the total hours of labor your company puts in per year, month, or day. Year: divide by 2080. Month: divide by 173.33. Day: divide by 8
From this, you’ll see that even if you employ all part-time workers but they work enough hours to qualify as over 50 FTEs, you’ll need to provide health coverage.
Once you know your number of FTEs and whether or not you’ll be required to start offering them insurance in 2015, you can set out your strategy for the shorter term.
Next, understand your options.
Companies with over 50 FTEs can:
- Offer an employer-sponsored group health insurance plan now. Don’t forget, you’ve got to include dependents up to the age of 26.
- OR offer an employer-sponsored group health insurance plan later - an option, but not one we would recommend. 90% of companies like yours are already providing coverage, so you probably fall into this camp too. At least start getting your ducks in a row for 2015 by understanding what will be required and what will help you prepare for those requirements.
Companies with under 50 FTEs can:
- Offer employer-sponsored coverage. Don’t forget about dependents! Also, if you have less than 25 FTEs, you should consider using the SHOP exchanges which are specifically for businesses like yours. If you use the SHOP to secure coverage for employees and cover at least 50% of their premiums, you may qualify for a tax break of up to 50% of that contribution. Those employees have to make an average of about $50,000 a year or less. You can find out if you qualify for the tax credit by going to the IRS website.
- Not offer employer-sponsored coverage. In this case, you and your employees will have to secure coverage another way. You can still help with this, by recommending that your employees use the public marketplaces, and even utilizing a defined contribution model if you still want to help offset some of their premiums (although that will take the form of salary gross-ups and will be taxable income).
And know what you have to do between now and 2015:
All employers will have to:
- Provide exchange notices - all this does is notify your employees that they DO have what is categorized as “affordable coverage” and therefore their employer provides adequate coverage under the new healthcare law (including minimum essential benefits)
- Handle requests from employees who aren’t currently on employer-sponsored health plans due to the individual mandate
- Give advance notice of plan changes - 60 days
- Eliminate waiting period over 90 days (so, no “1st of the month following 90 days” condition for waiting period)
And there’s some fees for employers due to PPACA, which you’ll likely see reflected as premium rate hikes:
Patient Centered Outcome Research Fee (PCORI)
- Why? To fund patient-centered research. Really.
- Fee in 2014 is $2 per covered employee per year, built into your 2014 rates
Traditional Reinsurance Fee
- Why? Helps cover insurance companies’ added expenses due to high-risk individuals who are just entering the insurance marketplace (the ones who were previously declined coverage due to preexisting conditions)
- $63 per plan participant per year (includes dependents) which is built into 2014 rates
Health Insurance Tax (HIT)
- Why? Helps to fund the state and federal health insurance marketplaces.
- Estimated to be 2-2.5% of total premium in 2014 and 3-4% in 2015. This cost is also baked into the premiums passed down by carriers.
- Why? To stop you from getting super-rich plans, because it’s not viable.
- Goes into effect in 2018. Fee is 40% of value of employer-sponsored coverage exceeding $10,200 per individual or $27,500 per family
Specific requirements or recommendations for companies with over 50 FTEs:
- You’ll have to start tracking hours in 2014 to be able to establish mandate applicability
- Be ready to identify those FTEs throughout 2014
- Be prepared to include employee DOBs on your employee census if you’re going to be getting quotes for health insurance
- You’ll have to present evidence of mandate applicability by October 2014 (less than a year from today!)
- Start designating employees as variable hour to be smart - it will reduce risk of lawsuits in 2015
- Keep in mind that employee premium for single coverage can’t exceed 9.5% of employee income
And for those under 50 FTEs:
- Be ready to handle requests for coverage from employees who aren’t currently on employer-sponsored health plans
- Be prepared to include DOBs on census if you are a SMB and you’re getting quotes for insurance
For companies of any size, Maxwell can provide guidance on ACA requirements, from planning for the Employer Shared-Responsibility mandate of 2015, to helping communicate with your employees about exchanges, minimum essential benefits, and changes in employee premium rates. Our technology makes managing your team’s benefits super-simple (all paperless!) and our service team is here to support for everything after the initial benefits decision.
If you already have coverage and/or work with a broker, we can simply sync your benefits onto the platform and then your employees will have access to their insurance info, concierge service, and wellness program via the MyMaxwell portal and mobile app.
If you’re getting coverage for the first time, we’ll drastically simplify enrollment and management of those benefits going forward once we’ve got your team up and running on the MyMaxwell portal.
Let us know if you’d like to speak with a Maxwell team member about getting Maxwell for your company, or if have any other questions around the Affordable Care Act or employee benefits in general. We’re here to help!