Q: This new legislation has me baffled! We have 12 participants out of 45 full-time employees. Our insurance company is jacking our rates up on our effective date of November 1, 2013—with the promise of increasing 35% to 65% next year. I don’t think it’s worth continuing to offer coverage for 12 participants when facing that sort of increase, but I think when looking at our measurement period data that we must. Can you explain what full-time equivalent means?
A: The increases you mention are happening—but, not all the time. The “good news” is that you have a number of options. But, let’s take a closer look at your question, and to do so we have to examine your actual employee count.
If you have 45 eligible employees for health insurance, you have probably reached the 50 full-time equivalents as the government defines. Forty-five employees with 30 hours per week or more, and if your school employs an additional eight employees working 20 hours per week, then that counts as 5 FTE (8*20/30).
This means, that the failure to offer health insurance this year does not affect you, but in 2015, if you do not offer coverage that is considered affordable and that meets the essential minimum benefits, you will be fined 45-30)*2000= $30,000 (45 FT employees minus 30 = 15 times $2,000). Also, the employees will lose any pretax on their premiums and the penalty is not tax-deductible as your employer contribution to health insurance was.
If you do offer coverage but it is not deemed “affordable” (9.5% of an employee’s W-2), then for anyone who accesses the government exchange and who is eligible for a subsidy, you will be fined $3,000 per employee—but no more than the above fine of $30,000.
If you have taken into account all employee hours and you actually have 45 employees, you may be eligible to go to the Small Employers Health Option Program (SHOP). If you are part of the federal exchange, you would pick your plan there and your employees could still pretax their dollars. If you have a state exchange as one of your options, most give you the option of picking a metal level (Bronze, Silver, Gold, Platinum) to offer employees in which your employees can choose any plan on that metal level. Or, you have the option to choose an insurer and employees can pick any plan by that insurer. Again, the employees can pretax their share of the premium and you get an aggregate bill.
Besides controlling costs in the typical manner, i.e., by changing deductibles, co-pays, and coinsurance, your school can consider partially self-funding your health insurance. However, this is NOT without risk. Your school's demographics and loss history will come into play. Don't consider this approach without speaking to someone well-versed in this area.
