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The Affordable Care Act is Here – Are You Ready?

In June 2012, the Supreme Court ruled the Patient Protection and Affordable Care Act (ACA) constitutional and, in doing so, upheld its stipulations. This ruling and the most recent presidential election suggests the ACA is here to stay.

The ACA will have far-reaching effects that will touch everyone in some way. Clearly, it’s a big topic that can’t be dealt with in one brief blog. Our focus here is on businesses “in the middle” – those that may or may not need to comply with the health care and reporting provisions; not the large organizations with 50+ employees, who will clearly need to participate, nor the small companies with just a handful of employees, who are exempt (for now, anyway).

If you’re the owner or CEO of a midsized business, how do you determine if this law applies to you?

You first need to ascertain whether the government agrees that your company is midsized or considers you a large employer. Large employers, by the ACA definition, employ 50 full time or full time equivalent workers. Under the ACA rules, staff members are considered to be full-time if they work 30 or more hours per week.

Here’s an example: ABC Medical Associates employs 34 full-time (30 hours or more) and 20 part-time employees (24 hours each per week). 20 part-time employees (the equivalent of 10 full-time employees) plus 34 full-time employees, equals 44 full-time employees, right? WRONG!

Given a four-week month, the part-time employees each work 96 hours per month. Multiply this figure by the number of employees (20) and you get 1,920 worker hours per month. Now divide this figure by the number of hours expected of a full-time employee in a month (120) and surprise! ABC Medical Associates employs 16 full-time equivalent workers and is considered by the ACA to be a large employer (16 full-time equivalent plus 34 actual full-time staff).

So what’s next for ABC Medical Associates? The company must decide whether to play along with the rules by offering affordable (the cost must not be more than 9.5% of an employee’s wage) health care that provides at least minimal and essential coverage, or pay the penalty for nonparticipation.

Penalties are triggered when employees seek coverage from health insurance marketplaces, also known as “exchanges,” and employers pay the lesser of $3,000 per employee who goes to the exchange or the amount determined by the formula:

(Total Number of Full-time/Full-time Equivalent Employees) – 30 X $2,000

Remember though, penalties only apply if employers don’t offer at least minimal and essential coverage at an affordable rate.

If that’s not complicated enough, large employers must provide their employees with a number of notifications no later than October 1, 2013.

Do you know if your company qualifies as a large employer under the ACA rules? Our example used a static 24 hours per week, but what if your part-time employees’ hours vary from week to week? How can you reduce the financial impact the ACA will have on your company? Do you have tools in place to ensure you’re making an educated decision about providing health care coverage versus paying the penalty?

We suggest making a connection with one of our strategic partners, ADP Payroll Services. Their representatives analyze data from your previous twelve months to determine the likelihood of your company falling under the ACA regulations. If you will be subject to these requirements, they can implement a strategy to minimize the financial impact. ADP also assists with automating the notification and reporting processes. It’s free to call and ask how they can help you.

If you don’t have a contact at ADP, we’d be glad to recommend ours. We want you and your business to be healthy! Contact us at or 904-396-5400.

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