The health care reform known as Affordable Care Act or “ObamaCare” is comprised of many law provisions and with the scope that is well beyond something a public accounting firm can even attempt to advise client on. Nevertheless, the following are some essential pieces of the legislation that you, as employer, must be aware of. For further specific information, we believe your insurance agents are probably better equipped to answer your questions.

For Individuals

From January 1, 2014, all U.S. persons must maintain minimum essential health care coverage or face penalty. Low or moderate income individual is eligible for insurance premium tax credit if he or she:

• Purchases coverage through an exchange
• Has household income that falls betweek 100% and 400% of federal poverty line
• Is not offered “affordable” coverage through employer sponsored plan that provides “minimum value”
• Is not actually enrolled in an employer sponsored plan
• Is not eligible for coverage through government programs such as Medicaid or Medicare
• Files a joint return, if married; and
• Is not claimed as a dependent by another person.

For Employers

Starting year 2015, employers with 50 or more full-time employees must offer “affordable” medical coverage to full-time employees and their children up to age 26 or face penalties.

The coverage is “ affordable” if employee contribution is less than 9.5% of

• W-2 wages
• Monthly wage (defined as hourly rate x 130 hours per month) or
• Federal Poverty Level for a single individual

Also the coverage must provide “ minimum value” which is defined as 60% of cost of covered health services.

Employer penalties are computed as follows:

• $2,000 per full-time equivalent (FTE) minus first 30 FTE, if no coverage is offered and if at least one full-time employee receives federal premium assistance for insurance exchange coverage.
• Lesser of $3,000 per FTE receiving tax credit or $2,000 per FTE minus first 30, if the provided health plan does not provide the “ minimum value” or is not “ affordable”.

Penalty examples:

• 500 employees but no coverage is offered. 470 (500 minus 30) times $2,000 = $940,000
• 1,200 employees with 250 employees who purchased coverage on the exchange and received government subsidies. Lesser of:
• $2,340,000 (1,200 employees minus first 30 = 1,170 employees x $2,000)
• $750,000 (250 employees receiving subsidies on the exchange x $3,000)