With the re-election of President Obama, the Affordable Care Act, often referred to as “Obamacare,” is on its way toward implementation. And while many Republican governors, including Gov. Rick Scott of Florida, were originally critical of the plan, state leaders are now faced with figuring out the best way to provide Floridians with the best possible health care options.

 

There are a number of components to the Act, focusing on the responsibilities of individuals, small businesses and large employers. For example, beginning in January of 2014, individuals must carry minimum essential health coverage for themselves and their dependents, and those who are not exempt or do not receive health insurance through an employer are required to purchase insurance from a private company. Minimum essential coverage includes coverage under eligible employer sponsored plans, individual market plans, certain grandfathered plans and Medicare, Medicaid and other government sponsored coverage. Individuals who do not maintain coverage are subject to a tax, or what is called a shared responsibility payment.

 

One of the key decisions facing the state of Florida is the decision of whether to start an exchange—a state-run health insurance marketplace for small businesses and individuals—or to leave it up to the federal government to establish. These exchanges, which will begin operating in 2014, will enable consumers to shop for health insurance online, and lower-income purchasers would qualify for federal subsidies. Plans offered by the exchanges would provide a minimum level of benefits with limited co-payments and out-of-pocket expenses. To date, 13 states and the District of Columbia have officially stated that they will run their own exchanges.

 

Large employers, which are defined as having 50 full-time equivalent employees during the preceding calendar year, each of whom works an average of 30 or more hours per week, must provide employees and their dependents the opportunity to enroll in minimum essential insurance coverage by January 1, 2014. Smaller companies—those having less than 25 full-time equivalent employees with average annual FTE wages of less than $50,000 per employee—can find insurance using the exchange and will be awarded a tax credit. These employers are eligible for a tax credit of up to 35 percent of the amount the employer contributes to purchased health insurance costs for employees, though they must participate in an insurance exchange to claim the credit for tax years beginning after Dec. 31, 2013. For tax years beginning after Dec. 31, 2013, the tax credit will increase up to 50 percent, and this credit is scheduled to terminate after 2015.

 

While some companies may be considering trying to cut down their amount of exposure by making more of their employees part-time or by offering coverage that does not provide minimum values, it is essential to understand how these decisions will affect their companies, and the success of the program, in the long run. For example, employers who offer coverage that is unaffordable or does not provide minimum value may be subject to penalties.

 

Premiums for the lowest cost, employer-sponsored health coverage must not exceed 9.5 percent of household income, or the plan is not considered to be affordable for the employee. A plan also fails to provide minimum value if it covers less than 60 percent of the total allowed costs of benefits provided under the plan. Employers who do not meet the coverage requirements of the Affordable Care Act may be subject to annual penalties of $2,000 or $3,000 per full-time employee (above 30 employees) if the business meets the 50 full-time employee threshold.

 

While details are still emerging about the Affordable Care Act, it is important for employers to stay on top of the changes that are facing the health care industry, and in turn, their livelihoods. While the intent of the Act is to provide affordable universal health care, knowing what options are available to make this happen in the most efficient way possible—on the individual, business and state level—benefits everyone involved.