If you’ve browsed through the Affordable Care Act, you may have seen the Employer Shared Responsibility Payment mentioned. This fee is charged to your business if you don’t meet the new healthcare insurance requirements. Originally legislated to start in 2014, this payment won’t apply to your business until 2015.
Even if you do own a business, you may not be affected by the ESRP in 2015. This payment only applies to your business if you have 50 or more full-time employees. For government purposes, your company is considered a large business if it employs that many workers. If your business has a smaller workforce, this penalty will not currently apply to your company.
Once your company has decided to offer health insurance to its employees, you must make sure that the policy you chose offers affordable coverage to avoid paying this fee. For the health insurance policy to meet this requirement, your employees’ premiums cannot exceed 9.5% of their yearly household income. While yearly income is affected by many variables, the government recommends using the W-2s your business issues employees to estimate their possible household income. Your business must also offer a health insurance policy that covers your employees’ dependents, as well as your workforce.
To avoid owing the ESRP, your business must also offer health insurance that meets minimum coverage standards. Currently, the health insurance policy your business offers must cover 60 percent of the total costs of covered services to meet this requirement. Plans purchased through the Small Business Health Options Program will meet your company’s minimum coverage requirements. However, SHOP is only open to your business in 2014 if it employs 50 or fewer full-time workers. Starting in 2016, your business can use SHOP if it has 100 or fewer full-time employees.
If you’ve decided not to offer health insurance, the ESRP is $2,000 per full-time worker. The first 30 workers are excluded from this calculation. If you offer health insurance but it doesn’t meet minimum coverage requirements, you will owe $3,000 for every full-time worker who is eligible for premium savings in the government’s insurance marketplace. It’s possible for your company not to owe an ESRP if none of your employees apply for health insurance. This situation can occur if your employees decline to pay for coverage or are covered through their spouse’s plan. However, only one of your employees needs to qualify for reduced-cost health insurance through the government marketplace to trigger the ESRP.
To avoid paying the ESRP, it’s important to know that your business is offering the right coverage to its employees. While the U.S. Department of Health and Human Services and the Internal Revenue Service will offer calculators and other forms of guidance to help you choose the right plan for your business, it’s easy to overlook an essential part of the new law. To get help picking the right health insurance policy for your business, call 888-888-8888.