How the Health Care Mandate Affects Non-Profit Organizations
Mark Helland, C.P.A.

In previous articles, I have detailed the provisions of the Affordable Care Act (the “ACA” or “Obama Care” to some, depending entirely on your political persuasion!) and have discussed some of the things that non-profit organizations should be aware of. One very controversial aspect of the ACA is the employer mandate and the associated penalties for non-coverage required of individuals and certain businesses that fail to provide coverage all of which take affect in the 2014 tax year. It was thought by many that these provisions were unconstitutional and that the U.S. Supreme Court would strike them down. However, in June of this year, the Supreme Court upheld all provisions of the ACA, including the penalty and non-coverage provisions. As such, it is time to look ahead to understand and plan for how these provisions could affect your organization and your employee population.

The first thing to understand is that non-profit organizations are NOT exempt from the coverage and penalty provisions of the ACA. Many non-profit organizations have incorrectly assumed that by virtue of their non-profit status they are exempt from the requirement to provide health insurance and the penalties related to the failure to provide health insurance. Unfortunately, this is not case. All non-profit organizations, including churches and ministries are subject to the requirement to provide health insurance. However, it is very important to understand that only relatively large organizations are affected. Large employers with fifty (50) or more employees may be subject to two potential penalties – the “no coverage” penalty and the “unaffordable coverage” penalty. The penalties are sometimes referred to as the “employer mandate” because they effectively require employers to offer coverage or pay a penalty. Following are the rules that non-profit organizations need to start planning for which will begin as of 2014:

1. The “No Coverage” Penalty (also known as “Pay or Play”)

If an employer does not offer full-time employees, and their dependents, an opportunity to enroll in employer provided health insurance coverage and at least one full-time employee enrolls in a federally subsidized health insurance exchange and the employee received government subsidies to pay for exchange coverage, then the employer is subject to this penalty. It is important to understand the “and” part of this equation, because most of the information you read omits the second requirement and simply states that if you have over fifty employees you must provide health insurance. In effect, you could have over fifty employees, not provide coverage and be exempt from the penalty, but only if you have no employees who are covered by a federally subsidized health insurance exchange (which would be unlikely, but possible). The exchanges are available to individuals in which household income is less than 400% of the federal poverty level ($89,400 for a family of four in 2011). So, if all employees of an employer have a household income greater than 400% of the federal poverty level and are covered by an exchange, then these penalties would not apply. In reality, almost every employer will have at least one employee whose household income would potentially qualify them to be in an exchange. The “no coverage” penalty amounts to $2,000 for each of an employer’s full-time employees, however, in calculating the penalty the first thirty (30) employees are excluded. Employers can avoid this penalty completely by offering health coverage to full-time employees, but the “unaffordable coverage” penalty may still apply.

2. The “Unaffordable Coverage” Penalty (also known as “Free Rider”)

Even if an employer offers full-time employees, and their dependents, an opportunity to enroll in employer provided health insurance coverage, a potential for penalties still exists. The coverage offered by the employer must be both “affordable and valuable” to avoid this additional penalty. If at least one full-time employee enrolls in a federally subsidized health insurance exchange and is certified to receive government subsidies because the employer’s coverage is considered either unaffordable or low-value, then the employer is subject to this penalty. The “unaffordable coverage” penalty is $3,000 for each full-time employee who is certified to receive government subsidies and unlike the “no coverage” penalty, this one is not based on all full-time employees. Avoiding this penalty may actually not be that hard to overcome and close coordination with your health insurance agent is a must here.

Key Point:
A key question that I have in all of this, is how would an organization even know or be informed that they have an employee who is covered by a federally subsidized health insurance exchange? It would seem that asking employees this question would be a privacy violation or a prohibited question when interviewing and making hiring decisions. I have not been able to find a definitive answer to this question yet, but I am still researching.

The takeaway from all of this is that if you have over fifty employees and you currently offer health insurance, then you have much less to analyze to be in compliance. However, if you have over fifty employees and do not offer health insurance, your decision is much more complex. An analysis needs to be made to consider how the specter of employer penalties compares to the cost of providing health insurance. Also, in considering your employee population, if your organization provides health insurance that meets all of the requirements, so doing also means that the employees will not be eligible for the government subsidized exchanges. Employers may want to consider whether their employee population would be better served in an exchange with government subsidies or with employer-provided coverage.

Additionally, if your organization is small – i.e. less than twenty five (25) full-time employees, you need to make sure that you are getting good professional advice on the health care credit that is available to make providing coverage more affordable. Here is a hyperlink to my previous article for Tony Cooke Ministries on this topic: Health Care Reform and the Health Insurance Tax Credit by Mark Helland. My next article will focus on the individual penalties that are present in the ACA and how individuals who must provide health insurance for themselves can plan to comply with these provisions.

 

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is shared with the understanding that neither the author nor Tony Cooke Ministries is engaged in rendering legal, accounting, psychological, medical or other professional services. Laws and regulations are continually changing, and can vary according to location and time. No representation is made that the information herein is applicable for all locations and times. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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