Many clients and their household employees have questions about their responsibilities and opportunities related to health insurance and the Affordable Care Act. We hope that the following FAQ will help clear up some confusion.
What is the Affordable Care Act?
The Affordable Care Act or “Obamacare,” is federal legislation that is a major overhaul of the US health care system intended to both reduce the cost of health care and dramatically increase the number of insured in the United States.
I am a household employer. Do I have to provide health insurance to my household employees?
No, employers with fewer than 50 employees do not have to provide health insurance to their employees. Your obligation is to provide your employees annually the appropriate notice of your intent and information about the Health Insurance Marketplace.
Does my household employee have to obtain health insurance?
Yes, all Americans, including household employees, are required to obtain health insurance or face fines collected on their individual income tax return.
Where does my employee go to purchase health insurance?
The Health Insurance Marketplace at HealthCare.gov is the federal government-run health insurance exchange where individuals can compare different plans and purchase health insurance. Your household employee may also shop certain state-run health insurance exchanges, or shop directly with insurance companies and other insurance websites.
Open enrollment for 2015 runs November 15, 2014 - February 15, 2015.
Are there tax advantages for me if I contribute to my household employee’s health insurance policy?
Absolutely, our tax code has encouraged and rewarded employer contributions to employee health insurance for decades and to a limited extent household employers participate in tax advantages.
CREDIT FOR SMALL EMPLOYER HEALTH INSURANCE: When you set up a health insurance policy for your household employees (2 or more) through the SHOP (Small Business Health Options Program) on the Health Insurance Marketplace you may claim a credit of up to 50% of the contribution you pay. To qualify:
- You must pay at least 50% of your household employee’s health insurance premiums;
- Purchase the health insurance through the SHOP either on your own or working with your insurance agent;
- Complete Form 8941 and include with your personal income tax return.
Employers who have only a single employee may continue to reimburse the employee's health insurance that the employee purchases on the individual exchange on a pre-tax basis, as the ACA legislation only applies to employers with 2 or more employees. This is a tax benefit to BOTH the employee and the employer. The IRS is expected to issue formal guidance on this in the very near future.
We understand that many household employers are confused about their options with the Affordable Care Act. Please don’t hesitate to call HWS weekdays 8:30 – 7 PM EST and we will be happy to talk you through this.
Tax rules and regulations surrounding the health insurance industry are in a period of rapid change. HWS provides this information as a courtesy to help you understand payroll tax changes resulting from the ACA. This is not be construed as specific tax or legal advice. Guidance relative to the ACA / Obamacare is subject to revision and this may not be the most current information available.
Affordable Care Act Resources:
NYT: Regulators Warn Employers against REIMBURSING Employees for Health Insurance
US Department of Labor: Compliance of Premium Reimbursement Arrangements
IRS: Small Business Tax Credits for Health Insurance
Key Facts about the Small Business Health Options Program (SHOP)