Small Business Employer Mandate: Are You Ready?

With the many changes that have been made to the Affordable Care Act (aka ACA and Obamacare) it is all right if you’re a bit confused. After all, you have a business to run. But, fact is, after multiple delays the employer mandate will finally kick in on January 1, 2015. Will your business be affected? What’s the deadline to comply? What are the penalties if you don’t? Where can you buy? Good questions all. Here are some answers.

Does the 2015 Employer Mandate Apply to My Business?

Yes, if you have 100 or more full-time equivalent employees (FTEs). The ACA says you must provide affordable health insurance coverage that meet minimum value standards for at least 70% of your full-time employees or pay a $2,000 annual penalty for each uninsured employee, excluding the first 30. The fines are levied if at least one worker buys health insurance from a government-run exchange and qualifies for a tax credit.

No, if you have 50 to 99 FTEs. As it stands today, the mandate for you doesn’t kick in until January 1, 2016. That gives you a whole year to get up to speed tracking hours to determine the number of FTEs you have.

No, if you have fewer than 50 FTEs.

The fact that you won’t be charged a penalty shouldn’t stop you from offering health insurance to your employees as a benefit. And nobody, small business or individual, is required to purchase health insurance from a government-run exchange. You have the right to do business directly with any insurance company offering ACA-compliant plans.You can get quotes and compare benefits for group health insurance here.

How Do I Figure Out FTEs?

Have a calculator handy, because some of the math can make your head spin.

To calculate the number of FTEs, you need to take into account in all employees who work at least 30 hours per week as well as all employees who work fewer than 30 hours per week because, for example, two people working 15 hours per week each equal one FTE. Still, it’s easy enough to figure out if you have a stable workforce.

But, what if that varies from month to month because you have a seasonal business or a fluctuating workforce?  Use this formula to calculate FTEs for any given month: add the number of hours of service for all employees who WERE NOT employed on average at least 30 hours per week during the month and divide by 120. Disregard all fractions, but don’t round down.

To be absolutely sure of your status, it’s probably a good idea to contact your tax advisor or the IRS.

What’s “Affordable?”

Under ACA, affordable coverage cannot cost an employee more than 9.5% of his or her W-2 income. You are; of course, free to pick up the entire cost of employee healthcare. 

If you do offer health insurance, you must report the cost of the premiums on employees’ W-2 forms. According to the IRS, the benefit is not taxable income. Reporting the info is strictly intended to help employees understand the cost of their coverage. You also have to include healthcare costs to your employees on your business income tax filing.

What’s the Minimum Value Standard?

For healthcare plans to meet minimum value standards under provisions of ACA, they have to cover at least 60% of healthcare costs.

Can I Get Subsidies?

Maybe. If you have 25 or fewer FTEs, pay average annual wages under $50,000 and cover at least half of their health insurance premium costs, you can qualify for a tax credit for up to 50% of the premiums you pay. The credit is available for two consecutive tax years. The catch is that you must purchase your insurance from a state or federal SHOP, the small business equivalent of the exchanges such as

Do I Have to Use a SHOP?

Only if you want to qualify for a tax credit. As already noted, you have the right to buy directly from any insurance company in your state that offers qualifying plans. As of November 15, 2014, small businesses in states that use the federal exchange can apply and enroll in plans offered on SHOP online. Currently, there are only 14 states that allow companies to offer the Employee Choice option on the SHOP exchange. These include Arkansas, Florida, Georgia, Indiana, Iowa, Missouri, Nebraska, North Dakota, Ohio, Tennessee, Texas, Virginia, Wisconsin and Wyoming. All other states require that you select just one plan for all employees. And you may find that plans offered through exchanges have smaller provider networks than what’s available off exchange. That’s why it makes sense to shop and compare all your options.

What’s the Deadline for Compliance?

To make sure your current employees have coverage on January 1, 2015, you must have them enrolled no later than December 15, 2014. Unlike individuals, employers can add people to a plan at any time during the year.


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