Your guide to the Affordable Care Act: separating the facts from the myths

Answers to common questions about Obamacare

There’s so much politics and so many preconceived notions about the Affordable Care Act, especially when it comes to businesses, that the facts often get lost in the shuffle. Here are answers to many common concerns and questions of employers.

(Related: N.H. businesses put decisions on hold amid ACA confusion)

PENALTIES

1. My business is going to have to pay a penalty or offer health insurance next year.

Most businesses are not going to have to pay a penalty or be mandated to offer health insurance in 2014. Those with fewer than 50 full-time equivalent employees won’t have to pay a penalty, next year – or ever, unless the law is changed. And 80 percent of the firms in New Hampshire have fewer than 20 employees.

2. I don’t have to worry about coverage. I have 40 full-time and 15 other employees who work about 30 hours.

Sorry, but you probably will. For the purpose of this penalty, a full-time equivalent (FTE) is 30 hours a week or more, or 130 hours a month. For those employees who work less than 30 hours, employers can count up the hours they work in a month and divide by 120 (for no other reason but it’s in the law) making it even easier to meet the threshold.

3. Any way you cut it, I’m under 50 FTE next year, so there will be no penalties for me, at least for this year.

Not necessarily. Unless you are getting coverage from work, you and your employees as individuals will have to pay a penalty (with some exceptions). That comes out to $95 a year, or 1 percent of income in 2014, whichever is greater. It rises to $695, or 2.5 percent of income, by 2016. So if you are earning $100,000 as the CEO, you will personally pay $1,000 the first year and $2,500 by 2016.

4. The penalties on business are $5,000 per employee. That’s almost as expensive as health insurance.

Penalties are usually cheaper than the amount employers would have to contribute to premiums. If they don’t offer health insurance, the penalty is $2,000 per worker, excluding the first 30 workers. So if you have 50 employees, the penalty comes out to $40,000 a year. Most companies pay more than that in a month. However, premiums are deductible and penalties are not.

5. I want to help a little bit, but it will be a cheapo plan with high deductibles, and the employees will pay most of the premiums.

If that’s what’s offered to employees, an employer will still have to pay a penalty, unless you offer “affordable” and “adequate” coverage for 95 percent of those working more than 30 hours or more. That means premiums can’t exceed 9.5 percent of their pay, and it must cover at least 60 percent of a person’s medical costs (taking into account deductibles and copays). Otherwise the penalty kicks in, but this time you only have to pay the penalty for those workers who can’t afford it. However, the penalty is $3,000 per worker, and there will be no 30-worker exclusion. Or you can choose to pay the $2,000 penalty with the 30-worker exclusion, as above. You don’t have to pay both.

6. They won’t know if I’m offering coverage and what kind. Try and catch me.

Workers who aren’t offered affordable coverage can go to the exchange, where they probably will get a cheaper deal. And as soon as one does, they have to tell who their employer is, which that would trigger the penalty for your company.

7. I’m not going to worry about it until next fall, when things start ratcheting up.

The law “looks back” for 2014 to figure out what you are going to do in 2015. So the time to start worrying is now.

SUBSIDIES

1. I only have a dozen employees, so the ACA has nothing to do with me.

If you provide health insurance, there is a good chance that your company will be eligible for a tax credit. In fact, you may have been eligible for years. Ever since 2010, when the law went into effect, businesses with fewer than 25 FTE (based on 40 hours a week) can receive a 35 percent tax credit if their employees’ pay averages less than $50,000 a year and the company kicks in half of the costs. (If you have fewer than 10 FTE and the average wage is $25,000, your business will get the full credit.) You can still receive those credits, by filing a corrected return.

2. I filed for those credits in the past, and I hear they are going up. So I just will do what I did last year.

The maximum credit is going up to 50 percent. But in 2014, the only way to get it is to buy a plan on the exchange. The good news is there is a good chance those plans will probably be cheaper than your current plan, even before the credit. The bad news is that there will be a more limited network, and the hospital (and some providers) nearest your workplace may not be on it. Also, the credit will go away in two years.

3. My husband and I are the only employees at our corner store, and we’ve been getting insurance at the small group rate. Next year we can do that through the exchange, with the tax credit.

Starting in 2014, self-employed individuals and their family members can no longer qualify to buy health insurance as a small business. You can still go on the exchange and get a tax credit, but as individuals. Indeed you’ll have to, or pay a penalty.

4. We won’t get any tax credit as a family. We make some $80,000 a year from the store.

Actually, the tax credit starts at 400 percent of poverty level. For a family of four, that’s $88,000 a year. If you make that much, you won’t have to pay more than 9.5 percent of your income; the government will kick in the rest. As income decreases, so does the percentage you’ll be expected to pay. And unlike the tax credit for businesses, which is filed at the end of the year, this one is advanced against premiums.

Also, those below 250 percent of poverty level (around $50,000 for a family of four) will get help on their deductibles.

This article was based on information provided by government websites, as well as assistance from former state senator Ray White, president of Cornerstone Benefit & Retirement Group Inc.; Steve Gerlach, an attorney specializing in labor and employment law at Bernstein Shur (and a speaker at the NHBR’s Oct. 1 health care forum); Josh Robinson, president of Checkmate Workforce Management Solutions; Lisa Kaplan Howe, policy director at New Hampshire Voices for Health; CPA Steven A. Feinberg of Appletree Business Services LLC; and Greta Johansson, district director of the U.S. Small Business Administration in New Hampshire.