Health insurance change goes unnoticed by many small businesses

Health Insurance book report law

Health Insurance Change Small BusinessesSmall, yet significant change to health insurance mandate made late last year

Small businesses throughout the U.S. have been bracing for the financial impact of new health insurance regulations that will go active in 2014. Projections suggest that the health insurance policies that these companies offer to employees will become significantly more expensive when these regulations go live. In late December, 2012, amidst debates concerning the “fiscal cliff” that the country had been facing, an amendment to these federal regulations was introduced that went mostly unnoticed by small businesses.

Regulation will be based on size of company in 2013, not 2014

The new regulation will be based on the number of employees a company has in 2013, rather than the number of employees these companies will have in 2014. That means that small businesses will have to make changes to their workforce as soon as possible if they want to avoid the potential penalties they could face due to the federal law. Few companies are currently aware of this, which could put them at risk of being penalized in 2014.

Companies with fewer than 50 full-time employees will be exempt from health insurance mandate

According to federal law, small businesses with 50 full-time employees or 50 full-time-equivalent employees must provide health insurance coverage to their employees and their dependents  Those that do not comply with this law will face a $2,000 annual penalty for each full-time employee in excess of 30 full-time-equivalent employees. Whether or not small businesses fall under this mandate will be determined by their workforce numbers in 2013, not 2014.

Small businesses facing several penalties due to size and coverage options offered

Companies with fewer than 50 full-time employees will not be subject to the health insurance mandate. Part-time employees are not factored into the mandate. Small businesses also face several other penalties if the federal government deems the coverage options they provide as unaffordable or not compliant with minimum value standards.

Here are some basics that small businesses must know regarding the health insurance mandate:

  • Employers who averaged 50 or more full-time employees or 50 or more full-time-equivalent employees during 2013 will be subject to the health insurance mandate.
  • A full-time employee is one who is employed an average of 30 hours per week, or 130 hours in any given month. Seasonal employees are included in this definition if they meet the hourly requirements.
  • To calculate the number of full-time equivalents in a given month, add all the hours worked, but not more than 120 hours of service for any employee, and divide the total by 120.


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