Essential Info for Canadian SMEs About Obamacare

If you've got operations in the U.S., here's your primer on how to navigate the new health care requirements, weigh the options and avoid penalties

Written by Alexandra Posadzki

It’s not only our neighbours south of the border who are baffled over what the new health insurance regulations, dubbed “Obamacare,” will mean for employers. Canadian companies that have U.S. offices—or even “small outpost teams,” as Sarah Terrelonge of human resources firm ADP Canada calls them—will also have to comply with the rules.

“There’s certainly a lot of complexity to the Affordable Care Act, and what it means for employers,” says Terrelonge, ADP Canada’s director of market intelligence. In a nutshell, if your U.S. operations have more than 50 full-time staff—or the equivalent in part-timers—then you’ll be required to provide health coverage.

Here are five things you should know about the new regulations:

1.The deadline for employers has been extended: There are two separate aspects of the Affordable Care Act (ACA): those sections that are applicable to individuals and those that apply to employers. Judy Bauserman, a partner with New-York based human resources consulting firm Mercer, says both components were originally slated to take effect in 2014. But the government was having trouble writing the rules outlining the employer’s obligations, says Bauserman. “They couldn’t tell employers with enough clarity what it was that they needed to do.” Employers now have until 2015 to start offering health insurance to their staff. Employers who fail to comply risk paying a penalty of $2,000 per full-time employee.

2. The U.S. definition of full-time: Typically, employers define a full-time employee as someone who works 40 hours a week. Under the ACA, however, anyone who works an average of 30 or more hours a week is considered full time. “There are a lot of part-time people who will become eligible for health coverage under the new rules, and that’s a big additional cost to the employer,” says Bauserman.

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3. In some cases, it may be cheaper to pay the fine: There are two penalties for employers under the ACA. The first is a $2,000 fine per employee per year if you fail to offer some sort of health coverage to at least 95% of your staff (although you don’t get charged for the first 30 employees). Bauserman says most employers want to avoid this penalty. “You don’t have to offer particularly generous coverage,” Bauserman explains. In fact, you can offer your staff access to a group benefits plan without contributing to the premiums by deducting the premiums from your employees’ pay cheques. However, you would still have to pay administrative fees to the insurance company, says Bauserman. And, she adds, offering a better plan can help you retain talented employees.

The second penalty is more complex and deals with the affordability and minimum value of the coverage. The plan must cost less than 9.5% of an employee’s family income and cover 60% of anticipated medical costs. If the plan you’re providing doesn’t meet these requirements, you’ll be charged $3,000 for each employee who buys their own insurance and qualifies for a government subsidy.

Bauserman notes that for some employers, it might make sense to pay this penalty for some of their staff, rather than to provide a much more comprehensive, costly plan.

But Terrelonge cautions that there are no hard-and-fast rules. Determining the best course of action for your business requires weighing a number of factors, including the cost to your business, how important health insurance is to your employees and whether you currently provide coverage.

4. Benefits and taxes: Bauserman notes that health insurance can be an incentive to attract talent to your company. And, she adds, any money you choose to spend on benefits for your staff is exempt from payroll taxes. “It can be cheaper to compensate your employees through benefits rather than paying them in cash,” Bauserman says. Businesses with less than 50 full-time staff are also eligible to buy insurance plans through the Small Business Health Options Program, or SHOP, which is intended to make group benefit plans more affordable for smaller employers.

5. You may need professional help: Given the complexity of the Act, experts say it’s vital that you thoroughly understand the rules before you decide on your course of action. “It’s important to have a good grasp on what the requirements are, and where you sit today, so you can determine in a proactive and strategic way what’s best for your business,” says Terrelonge.

There are some online resources to help you navigate through the new policy. One is on the Kaiser Family Foundation’s website and another can be found on the U.S. Small Business Administration site. Even so, Terrelonge recommends hiring a professional consultant.

“Our advice at ADP would be to approach the ACA requirements as a strategic business issue, rather than an administrative task,” says Terrelonge. “Because it’s going to impact staffing decisions, compensation strategies and your overall HR systems and processes.”

Finally, Rick Wald, a national practice leader for Deloitte Consulting, advises that you take your time. “You don’t actually have to make a decision right now, because those penalties have been deferred for another year,” says Wald. “So you still have some time to watch what happens with the initial rollout of all of this and figure out what you want to do next year.”

Read: Export Wire//July 2

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