Healthcare Reform - Requirements for Providing Healthcare

Know the rights and penalties associated with providing healthcare after the healthcare reform.

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Carl Kleimann
Episode: 039
April 21, 2010

Summary:

Under the new Healthcare rules, employers are not required to provide healthcare to employees, but there will be a penalty involved for those that don't have coverage. Who gets to pay the penalty? Carl Kleimann knows.

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Carl: Hello business owners this is Carl Kleimann with another Business Survival Tip from Odyssey One Source. Many employers are under the impression that the recent healthcare reforms will somehow mandate them to offer healthcare coverage. Some also believe that these reforms will dictate policy terms such as deductibles and annual and lifetime coverage limits. That is simply not true. Even after January 2014 when the coverage mandates go into effect, employers may still decline to offer healthcare coverage to their employees. And by the same token, they can still chose to offer coverage that fails to meet the coverage guidelines set by the government. The catch is that someone will be penalized for that decision.

For organizations with 50 or fewer full-time employees, those penalties will fall solely on their employees. As of January 2014, most individuals that are not covered by a healthcare plan will face a penalty equal to the higher of $695 annually or 2.5 percent of their annual income. This will be assessed based on the number of months that they were without "qualified coverage" during the year.

It is only firms with 51 or more full-time employees that will be subject to federal penalties for failing to provide "qualified coverage." That means that whether these firms fail to provide coverage at all, or provide coverage that fails to meet the standards set by the government, they will be subject to a penalty. That penalty is $2,000 annually for each employee in excess of 30 employees (the first 30 are exempt) and only applies in the event that at least 1 employee receives a tax credit in order to purchase coverage through an exchange. That means that a company with 60 employees would be subject to a $60,000 penalty, which is still far less than the cost of providing healthcare. Of course the employees may not be very happy since they will face a penalty unless they obtain coverage elsewhere.

In all likelihood, only the smallest businesses with relatively low wage earners will find it feasible to pay the penalty in lieu of providing healthcare. Larger businesses with 51 or more employees and those that compete for skilled workers will likely find it more beneficial to offer "qualified coverage." The good news is that the reforms promise to make coverage more accessible to everyone.

I am Carl Kleimann and this has been another Business Survival Tip by Odyssey One Source, ranked as the number one Professional Employer Organization three years running by the Black Book of Outsourcing. For more information on this and other issues affecting employers, please visit www.odysseyonesource.com.