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PNC INSIGHTS Magazine Spring/Summer 2014 Issue
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Now is the time to reevaluate your policies and plan a strategy that complies with the law.

It has been more than three years since President Barack Obama signed the Patient Protection and Affordable Care Act of 2010 (PPACA), and while the law has been subject to blistering debate, it has had only minimal impact on the way businesses pay for and manage health care coverage so far.

But that is about to change: Effective January 1, 2014, employers with 50 or more full-time and full-time-equivalent employees will either have to provide affordable health insurance to qualifying employees or pay a penalty. Whether or not your company falls within these criteria, now is an excellent time to reevaluate your health care policy; it should not only comply with the law, but also control costs and maintain your competitiveness in the market. Here are some guidelines:

Meet the Requirement

It is a common misconception that employers of larger companies (50 or more employees) are required to provide health insurance. In reality, they have the option of meeting the affordability criteria below or paying a penalty. The criteria include:

  • Paying at least 60% of covered health care expenses
  • Insuring that no employee has to pay more than 9.5% of family income for coverage

If an employer fails to meet these criteria, employees can choose to purchase coverage on a state-based insurance exchange and receive a premium tax credit. (This subsequently affects the employer penalty imposed.)

Understand the Penalties

If an employer chooses to provide no coverage, the penalty is $2,000 multiplied by the number of full-time employees, minus 30. (Thus a company with 50 employees would pay $40,000 annually.) If the employer offers coverage short of the criteria, it must pay $3,000 for every full-time employee receiving the premium tax credit, up to a maximum equivalent to the penalty for no coverage. (The IRS defines a "full-time" employee as one working at least 30 hours per week, while full-time equivalents are calculated by dividing monthly part-time employee hours by 120.)

Determine the Worth of Each Option

From a purely financial point of view, the Affordable Care Act presents employers with a simple calculation: Is it less expensive to pay for health coverage, or to pay the penalties? There are other considerations as well. The smallest employers--those with 10 employees or fewer with average annual wages under $25,000--can receive a significant tax break (currently 35% of premiums, increasing to 50% in 2014) if they provide health care coverage, which they can purchase starting in October of this year from state-based SHOP (Small Business Health Options Program) exchanges. Of course, money isn't the only factor in deciding whether or not to provide health care. For one thing, since the law requires most individuals to purchase coverage (known as the "individual mandate"), applicants may assess this new expense when considering job offers. And with more companies providing coverage, failing to do so can put a significant damper on your employee morale and recruitment efforts.

With these considerations in mind, why not take the remainder of this year to learn about the options for your company with the coming regulations? There are a number of excellent online resources, but the most comprehensive is the federal government itself, which compiles its healthcare information at www.healthcare.gov.


The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.