Affordable Care Act: Why You Should Start Planning Now

As the Affordable Care Act goes into effect this year, employers will be responsible for providing staff working an average of at least 30 hours a week with health insurance or face fines starting in 2014, making healthcare a huge industry issue.

In fact, as reported by the National Restaurant Association the restaurant industry is expected to employ 13.1 million people in 2013, roughly 10 percent of the total U.S. workforce, making it the nation’s second-largest private-sector employer.

And as far as healthcare goes in particular, a recent survey by benefits consulting company Mercer states that almost half of hospitality (and retail) employers currently do not offer health costs coverage to their full-time employees.

With that, preparing for the implementation of the Affordable Care Act will undoubtedly put additional cost pressure (i.e. labor and management costs) on most restaurant operators this year.

For clarification of the Act and what it means for your business, we’ve outlined some key FAQ’s that could be helpful for crucial decision-making as the Act is implemented:

What is the Affordable Care Act? All workers will now have access to affordable health insurance options. The new Health Insurance Marketplace will allow individuals and small businesses to compare health coverage plans on a level playing field. Middle and low-income families will get tax credits that cover a significant portion of the cost of coverage, and the Medicaid program will be expanded to cover more low-income Americans. In short, these reforms mean that millions of people who were previously uninsured will gain coverage.

Is anyone exempt? Yes, companies with fewer than 50 employees.

What does this mean for larger companies? Those with 50-250 employees must now offer employees healthcare that meets the federal minimum coverage requirements outlined in the Act. Also, any plan offered cannot exceed 40% of the employee’s cost of care (i.e. actual medical costs). Lastly, employers should steer clear of major medical plans with large deductibles. With this Act, a company’s lowest paid full time employee cannot pay more than 9.5% of their gross income for insurance premiums plus deductibles.

*Note: If any of the above guidelines are not adhered to, the affected employee/s will then be eligible to get a plan ‘on the exchange’ (i.e. within the offered Health Insurance Marketplace) with a subsidy helping them pay for it, and the employer will subsequently be fined $3,000 per affected employee.

What if you choose NOT to offer a healthcare plan? Companies will be fined $2,000 annually for each full time employee above 20 employees. For example, if a company has 50 full time employees with no plan, the fine would be $60,000. Since the first 20 employees do not count, the company would pay for employees 21-50.

*Note: The above equation might prove helpful to those who straddle the 50-employee line, as it might prove less expensive to pay the fine then offer health insurance.

In the end, the Affordable Care Act is designed to protect those in the U.S. workforce, but implementing the Act into your company culture will require your making decisions based on what is best for your business and your employees.