A key objective of the Affordable Care Act is to ensure every American can afford health insurance. Based on ACA guidelines, a plan in 2019 is deemed affordable if the lowest-cost, self-only coverage option (not including insurance for a spouse or family) is no more than 9.86 percent of an employee’s household income. This “affordability percentage,” based on the annually adjusted federal poverty level, is a slight increase from 9.56 percent in 2018.
To avoid penalties, employers with more than 50 employees must cover enough of the monthly premium costs for their company-provided health insurance to keep workers’ contributions below the maximum amount allowed by the ACA. (Companies with fewer than 50 employees are exempt from this mandate.) If employers overshare the cost of the program or push too much of the premium cost onto employees, they run the risk of their health insurance plans dipping below the ACA’s minimum affordability threshold.
The penalty for failing to offer affordable coverage is $3,750 per employee in 2019, up from $3,480 per employee in 2018. Employers also should remember the ACA mandates that a company health insurance plan cannot require an employee to pay more than $7,900 out-of-pocket annually for self-only coverage or $15,800 for family coverage.
Determining how much to charge employees for their portion of health insurance is complicated. Do it incorrectly, and you risk running afoul of ACA guidelines. While it may be tempting to try to cut employee benefit expenses by shifting the largest chunk of the cost to employees themselves, you may learn later that you have incurred sizable penalties for breaking the law.
Smaller company owners must walk a fine line between charging employees too little and too much for health insurance, weighing federal guidelines, profit margins, the ability to recruit and retain employees and other business issues.
Instead, smaller business owners may get back to focusing solely on their core businesses by partnering with a professional employer organization (PEO) to administer their health insurance plans and other complicated, mission-critical employee management tasks.
PEOs like Axcet HR Solutions are in the business of understanding the ins and outs of human resources and legal compliance, including the intricacies of the Affordable Care Act. They’re HR experts – something most business owners are not.
PEOs assume the heavy responsibility of managing all matters pertaining to employees, a company’s most valuable resource, ensuring business owners can both provide affordable health insurance and be protected from HR non-compliance and its costly consequences.