What is the individual mandate (under the Affordable Care Act, or Obamacare) and do I need to be concerned? How will the law affect my small business?
The individual mandate is here. Ostensibly, the federal exchanges were opened on October 1st. In reality, there is much work to be done, but nevertheless, the mandate is currently the law and it’s something about which all of us need to be concerned.
In simple terms, all individuals must have health insurance for themselves and their dependents, or pay a penalty. The penalties begin in 2014 and will be levied by the IRS on your tax return. The penalties are the lesser of (1) a flat dollar amount/percentage of your income, or (2) the national average premium for the lowest-level plan providing minimum coverage. The penalty is incurred for each month that the individual lacks coverage. It is written as such that the penalty is payable upon notice and demand by the IRS (presumably meaning that if it is not paid with the tax return, the IRS will send a notice demanding payment).
As has been much reported recently, even if you currently have health insurance, there is no guarantee that it has the minimum essential coverage that is required under the law, so a review of your policy is necessary. Many individuals have received cancellation notices, meaning they will have to find insurance via the federal exchanges (for Ohio residents). Although there is a move afoot currently to allow individuals to keep their current coverage for one additional year even if it does not meet the current standards, nothing is definite. It appears that the one-year extension of non-qualifying plans would apply to small businesses that offer such non-qualifying coverage to its employees.
If you have health insurance through your employer, then you should have received (or will receive soon) information regarding your current plan and the exchanges. If you do not, then the federal exchanges exist for you. You may also consult with local health insurance agents as health insurance companies have obviously modified their healthcare plan offerings to comply with the law.
Regarding businesses, there was a lot of news earlier this year when large employers (those with greater than 50 employees) were granted a one-year reprieve on the mandated coverage of health insurance for their employees (the “employer mandate”). Still, large businesses face very large penalties if they do not offer health insurance to their employees, or if the insurance they offer does not meet the minimum coverage requirements. Therefore, many businesses that may exceed the 50 employee threshold are seeking many ways to remain “small,” typically by cutting hours to fall below the 30-hour-per week threshold on average.
Some small businesses have changed how they offer health insurance to their employees, either by changing employee hours, as noted above, by adopting a self-funded health insurance model, or by using the exchanges themselves. A good resource for small businesses regarding healthcare is http://www.sba.gov/healthcare. Not only will you find a summary of the changes, but will also become aware of the other nuances of the law that take effect this year and next year.
There are credits available to individuals and businesses to help pay for the insurance, but these are all dependent on a variety of factors, many relating to income/salary level.
Overall, it’s simple to state that it is a federal requirement that all individuals have health insurance or pay a penalty. It can be very complex, however, to determine how to fully comply with this requirement to avoid penalty. Your employer, current health insurance agent, CPA or other trusted advisor provide great resources to assist you during this time. It never hurts to ask.