Let’s Look at the Affordable Care Act

I keep on getting questions about Obamacare.  Is it as bad as people say?  Is it hype? What does it mean?   Well, here’s what I think it means (thanks, in part, to Inc. magazine):

If you have less than 50 employees or 50 Full Time Equivalent (FTE) employees, the law should not impact you.  However, from the perspective of hiring, if a business has 49 employees, odds are they will not make that extra hire.

However, if they have less than 25 FTEs, and their average salary is below $50,000, they might qualify for a two-year tax credit to enable the to buy health insurance. The good news is that they will then become a more desirable employer. Of course, the question is, What will happen after the two years?  Moreover, the government already gives tax credits to employers who hire veterans.  But the process is so cumbersome that most employers don’t even bother.  Will it be the same under Obamacare?  Time will tell.

If a company has 50 or more employees or FTEs and they offer insurance, the question is whether or not they pay at least 60 percent of their employees’ health costs.  If so, the next question is, Do any of the employees pay more than 9.5% of their W2 income on health insurance?  If so, the employer has to pay a penalty of up to $2,000, not counting the first 30 employees. So for number 31 to 49, the penalty is in force.

If the employer is not paying at least 60%, they may qualify for a tax credit, but the above mentioned concern is still valid.

The good news is that if they cover 60%, and no one pays more than 9.5%, then they are in compliance with the law and have no worries about penalties.

By the way, Full Time Equivalency means at least 30 hours or more a week, not 40.

And one more thing: If an employee is under 26, they can be covered by their parents’ insurance. So let’s say a company only hires 18 to 25 year olds. They will save a ton of money, which may be the only way they can operate.  But, are they opening themselves up to an age discrimination suit?

So is the Affordable Care Act affordable?  Only time will tell.

Advertisements