Planning for Obamacare…

In 2014, the law kicks in:  individuals will be required to have a qualified health insurance plan covering the essential health benefits.  Employers with 50 or more full time equivalent employees are subject to a tax/penalty if one or more of the employees receive a government health insurance subsidy in order to purchase health insurance on the individual exchanges.  If no employee purchases insurance on an exchange with subsidy assistance, there is no tax/penalty imposed on the employer.  For a good summary,click on the  NFIB Cribsheet.

Calculating Subsidies

To receive a subsidy, the employee must have an income under 4 times the poverty level AND the employee’s portion of the employer plan insurance premium must exceed 9.5% of the employee’s household income.  Does this make your head spin?

Planning Strategies

There are several items to consider in planning for 2014 in order to avoid the tax penalty.

First, if possible, keep the employee count under 50.  Setting up separate entities to split employees to different companies will likely not be an avoidance strategy.  In fact it is expected that common owned companies will be required combine employee counts even if the companies are not related.

Second, if there are over 50 employees, set the employee contribution at no more than 9.5% of the lowest paid worker.  Develop a base minimum health insurance plan that will allow provide some coverage that you afford and be cheaper than the penalty.    This sounds basic, but may be the lowest cost alternative.

Consider offering a better plan than the standard “exchange” at a higher employee contribution level.  If no employees opt out of the employer coverage, then there is no penalty.

Offer a mix of plans with different contribution levels.  Using a base plan to meet the match requirements and offer a “buy-up” plan that provides better coverage but at a higher employee premium.

Key Consideration

Too much remains unknown about the future rules and regulations to set a definite plan in place today.  It will be important to analyze the costs of coverage and penalties.  Give me a call if you need help in this planning.  I will be keeping up with the regulations and will be able to assist in understanding the financial considerations of the various choices that will evolve.


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