The cost of not being ACA compliant

The cost of not being ACA compliant

Companies are ramping up their efforts to prepare for the imminent implementation of the Affordable Care Act on January 1, 2014. The federal regulation will change how employers think about healthcare and what kind of coverage they'll provide to employers. The goal of the bill is to enhance Americans' access to medical care by increasing access to insurance through businesses, private providers, public programs and non-profits.  

The ACA also includes provisions to penalize employers that don't meet certain thresholds for medical coverage. These mandates were included to ensure that businesses would owe more in fines than if they had paid for group insurance plans for qualifying staff members. 

To understand how much companies can owe in penalties and why certain enterprises will be sanctioned, read the following analysis of the ACA's requirements. 

Affordability and adequacy
The Federation of American Scientists explains that employers who provide health insurance to workers have to adhere to affordability and adequacy standards to avoid penalties. In terms of affordability, plans must cost employees less than 9.5 percent of their income. This provision will ensure that staff members aren't losing significant portions of their earnings to health coverage. 

In terms of adequacy, the Internal Revenue Service explains that health coverage has to cover "at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan." To streamline compliance, the IRS and Department of Health and Human Services created a value calculator, which is available through the Centers for Medicare and Medicaid Services. Pertinent data, including "deductibles and co-pays," can be entered into the service to determine if a business' plan is compliant with the ACA.

Who can be penalized?
Not every business will be subject to fines under the ACA. Only enterprises with 50 full-time employees or greater can penalized. However, the ACA also outlines who is considered full-time and guidance for part-time and season staff members. According to the FAS, anyone who works an average of 30 hours per week are considering full-time. What's more, temporary and part-time contributors are included in the full-time count, but aren't used to determine the fine. 

How penalties are calculated
The real heart of the matter is the formula used to determine penalties. The National Federation of Independent Business reports that businesses that don't offer insurance and have an employee who receives subsidies will be charged $2,000 per uncovered worker after the first 30. For instance, a company with 50 staffers will be fined $40,000 because it only has 20 more employees beyond the initial 30. 

Companies that have insurance pay $3,000 per subsidized staffer or $2,000 per full-timer after the first 30. The final penalty is determined by whichever amount is smaller. 

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