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How Houston Businesses Can Avoid ACA Penalties

A doctor advises a patient on avoiding ACA penalties.

Under the Affordable Care Act (ACA), businesses large and small are required to offer health insurance to their employees, or risk paying a penalty.

The benefits of offering affordable and essential coverage outweigh the gamble of receiving a Letter 226J from the IRS, stating that you owe a penalty due to non-compliance.

Figuring out what regulations apply to your business, and then how to comply, can be overwhelming.

We at Primary Care Insurance Solutions can help you understand what it is that you need to do as an employer to offer a better, healthier life for your employees, while also remaining compliant with ACA legislation.

Where would Employees Turn to if You Don’t Offer Health Insurance?

Offering benefits increases chances for employee retention and satisfaction. It makes for happier and healthier employees, which in turn increases productivity and revenue.

A loyal employee wants to know that their employer cares for them and their family and need to know that there is a cushion to fall back on when it comes to their health.

If coverage isn’t offered at work, employees have the option to obtain individual health insurance through the Marketplace or Exchange, or federal subsidy if their income is below a certain amount.

In the case that an employee shops the Marketplace or Exchange, they would receive a premium tax credit if the coverage through their employer is not affordable and/or meets minimum value, or the employee wasn’t offered coverage

But what would that mean to an employer if their workforce is looking elsewhere for benefits? It could mean ACA penalties that could cost you more than it would have to contribute to healthcare for your business.

Small Business Insurance

Small businesses can receive reduced healthcare costs for their employees, as well as tax credit, when group insurance is offered. It is only a good idea to offer health insurance for a small business workforce.

Employers are eligible for a Small Business Health Care Tax Credit (SBHCTC) as long as they have less than 25 full time employee equivalents, pay an average wage of less than $50,000 a year per  employee, and pay at least 50% of the costs for employee only coverage (not including family or dependents).

Small entrepreneur and self-employed businesses can also opt for association health plans to stay in compliance.

The amount of credit given to businesses works on a sliding scale, depending on how many full time employees you have and the average annual wage. Contact your Primary Care Insurance Solutions agent for more information.

Large Business Insurance

An Applicable Large Employer (ALE) is any business with 50 or more full time employee equivalents.

Businesses of this of this size must follow two major rules of the Affordable Care Act for Applicable Large Employers. They must offer insurance that is affordable and minimum essential and they must report information regarding that coverage to employees and the IRS.

An ALE must offer Minimum Essential Coverage to at least 95% of their full time employees and if even one full time employee receives a tax credit for shopping the Marketplace, it can risk the employer an Employer Shared Responsibility Penalty, or ESRP.

Possible Employer Penalties

Employers must offer health insurance that is both affordable and minimum essential.

It is important to ensure you offer these benefits to your eligible employees at a certain time and to make sure it is documented and reported to the IRS when needed, in order to avoid penalties.

An employer will be notified if they are being assessed a penalty if an employee receives subsidized coverage and will be given the opportunity to respond.

A letter 226J from the IRS will detail the penalty and what called for it, which can be responded and appealed to within 30 days.

If for any reason you receive a letter stating non-compliance, contact your Primary Care Insurance Solutions agent for better understanding.

Frequently Asked Questions

What is the requirement for businesses, both large and small, under the Affordable Care Act (ACA)?

Businesses, regardless of size, are required to offer health insurance to their employees under the ACA or face potential penalties.

How can offering affordable and essential health coverage benefit businesses?

Providing health coverage boosts employee retention, satisfaction, productivity, and revenue, contributing to a healthier and happier workforce.

What options do employees have if their employer doesn’t offer health insurance?

Employees without employer coverage can obtain individual health insurance through the Marketplace or Exchange, potentially qualifying for premium tax credits or subsidies based on their income.

What are the key requirements for Applicable Large Employers (ALEs) under the ACA?

ALEs, defined as businesses with 50 or more full-time employee equivalents, must offer affordable and minimum essential health insurance coverage to at least 95% of their full-time employees and report coverage information to both employees and the IRS.

What penalties can employers face if they fail to offer compliant health insurance coverage?

Employers could face penalties if they do not provide affordable and minimum essential health insurance as required. A Letter 226J from the IRS notifies employers of penalties, providing an opportunity to respond within 30 days.

How can Primary Care Insurance Solutions assist businesses with ACA compliance?

Primary Care Insurance Solutions offers guidance to businesses to understand ACA requirements, avoid penalties, and provide compliant health insurance options for employees.

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