1. HealthMarkets agents are neither tax nor legal professionals. For guidance regarding legal and tax matters specific
to your business, please consult a qualified advisor in those fields.
HealthMarkets Insurance Agency is the d/b/a or assumed name of Insphere Insurance Solutions, Inc. which is
licensed as an insurance agency in all 50 states and the District of Columbia. HMIA000524
Things Small Employers Should Know
■ Companies with less than 50 FTEs are not required to offer health insurance to
employees
The so-called “employer mandate” only impacts companies with 50 FTEs (full time equivalents)
or more. Note that this is 50 FTEs, not 50 employees. The law specifies the calculations for
converting part-time employees to FTEs. Note also that companies under common control have
their employee counts added together for the purposes of qualifying for the employer mandate.
The potential penalties take effect in 2015 for companies with 100 or more FTEs and in 2016 for
companies with 50-99 FTEs who didn’t take certain actions with regards to their workforce (for
those who took those actions, such as workforce reductions, the potential penalties take effect in
2015). Penalties are assessed if an employer either does not offer coverage to 95% of its full-time
employees and their child dependents, if the plan is considered unaffordable, or if the plan does
not meet a minimum value test.
■ Companies with less than 25 FTEs could be eligible for tax incentives for offering
health insurance
The tax incentive is available for employers with less than 25 FTEs, average annual wages less
than $50,000, and who contribute at least 50% of the cost of the group health premium. For those
companies who qualify, the tax credit is available for two consecutive years. The amount of the
credit ranges from 3-50% of the employer contribution (to a max of 50% of premium) and varies
according to average wages and number of employees. The maximum credit is available for
those with 10 or fewer employees and average wages of $25,000 or less. The credit declines as
either of those variables increase. Health insurance must be purchased through the government
SHOP (Small Business Health Options Program) exchange in order to qualify for the credit.
■ Your employees may be better off if you don’t offer a plan
In many cases, the net cost of individual health coverage to employees after federal subsidies is
less than the cost of a group plan to employees. Subsidy levels for individual employees vary with
family composition and household income. Every company must evaluate their specific situation.
The United States Department of Health and Human Services has announced that on average,
enrollees through the exchanges are receiving subsidies totaling 76% of the insurance premium1
.
However, employees are precluded from pursuing that option if they are offered insurance
through their employer (even if they do not participate in that plan). Note also that the elimination
of an employer-sponsored plan is a qualifying event that creates a Special Enrollment Period for
the employees, allowing the employees to enroll in an individual market plan without a break in
coverage.
1
“Federal insurance exchange subsidies cut premiums by average of 76%, HHS reports”, The Washington
Post, June 18, 2014.

2. HealthMarkets Insurance Agency Things Small Employers Should Know
Page 2
■ Companies cannot contribute to employees’ individual health insurance premiums
on a pre-tax basis
There are two common sources of misinformation on this topic. The first source is headlines
trumpeting that employers cannot “dump” employees to the exchanges. These articles were
triggered by guidance from the IRS (Notice 2013-54 which can be found at
http://www.irs.gov/pub/irs-drop/n-13-54.pdf). The key point is that employees may not use
Section 125 “Cafeteria Plans” or HRAs to reimburse employees’ premiums for insurance
purchased through the Health Insurance Marketplaces (or exchanges).
Working the other way, there are advisors suggesting that they have a plan design that allows for
pre-tax contribution to individual health insurance premiums. Referring again to the IRS notice
described above, it is clear that the intent of the regulation is to prevent such arrangements. The
potential fines for non-compliance are $100/employee/day.
■ Companies cannot make post-tax contributions contingent on the purchase of
health insurance
The Department of Labor recently published FAQs about Affordable Care Act Implementation
(Part XXII), http://www.dol.gov/ebsa/faqs/faq-aca22.html, further clarifying that even if
contributing on a post-tax basis, the contribution cannot be dependent on the purchase of health
insurance. Employers can make a wage increase with the intent that it be used for health
insurance, but there cannot be any mechanism to enforce that – the employee is free to use the
increased wages as they see fit.
Talk with your HealthMarkets agent for more information on the issues above, to assess your
individual situation, and to assist with the transition of the employees where appropriate.