What Happens if a Large Business Doesn’t Offer Health Insurance?

Under the Health Reform law, a “Large Business” is defined as one with 51 or more full-time equivalent (FTE) employees. If you are a business with 51 or more FTE employees, you are subject to penalties if you fail to offer health insurance.

What Are We Penalized For?

Starting in 2015, a large business is subject to penalties for not offering health insurance or for offering health insurance that is not affordable for all employees.

Penalty for Not Offering Coverage

The penalty for not offering health insurance is $2,700 per employee per year. You get a waiver for the first 30 employees.

So, for example, let’s say that your business employs 82 full-time equivalents (FTE) but 61 of them are Full Time Employees…. You get a waiver on the first 30, so that leaves 31 employees to pay penalty for….31 x $2,700 = $83,700 annual penalty.

FTE are the hours worked by one employee on a full time basis. The concept is used to convert the hours worked by several part time employees into the hours worked by full time employees.  The FTE count is calculated by the hours of service by all employees who were not full time in a given month (capped at 120 hours per employee), divided by 120. This number is added to the number of FT employees to determine if an employer is an applicable large employer (ALE) and mandated to provide affordable health insurance to its employees.

What If My Plan Is Not Affordable?

A large business plan has to pass an Affordability Test for each and every employee.

What the employee pays toward the employee-only premium (for single coverage, do not count what he might pay toward spouse/partner or children’s coverage) cannot exceed 9.83% of his/her annual household income, and must cover at least 60% of the services covered under the plan.

If your plan is unaffordable, and at least one employee tries to use a tax subsidy to get lower costs on Obamacare Individual or Family Insurance plans, then the penalty is $4,060 per employee per year who receives the subsidized plan.

Is It Better to “Pay or Play”?

Good question. Many businesses are wondering if it’s better to pay (by paying penalties and not offering coverage) or play (by offering affordable coverage to employees and avoiding penalties).

That answer may be different for different businesses.

Let our experts show you – down to the penny – how much each strategy will cost your business. We’ll advise you on what might be the best thing for your business and develop a customized financial plan.

Contact us for your complimentary review or call (404) 256-2171 and ask for Al Schiebel to see what option is best for your business.