Under the Affordable Care Act, there are certain guidelines that business owners must follow, but health insurance for franchise owners involves an extra layer of complexity in the enrollment process. Having a thorough plan is critical for avoiding fines and other mishaps down the road. Consider the following to help you navigate the process.
Do franchises need to offer health insurance to employees?
Although the financial penalty for the individual mandate of the ACA was reduced to zero, employers with an average of 50 or more full-time employees, including full-time equivalents, during the prior year are still required to offer a minimum level of health coverage to eligible full-time employees and their eligible dependents. This includes franchise owners, who are part of the same controlled group and may employ 50 or more employees across multiple franchise locations.
Franchise owners and health insurance laws
As a franchise owner, you need to understand how employees at different franchise locations are calculated based on the ACA requirements. According to Julie Whittaker with the Congressional Research Service, "An employer of multiple entities (such as a franchise owner with several restaurants) must follow the IRS aggregation rules governing controlled groups. Specifically, if one individual or entity owns (or has a substantial ownership interest in) several franchises, all those franchises are essentially considered one entity."
In short, if there are 50 or more full-time employees, including full-time equivalent (FTE) employees, across all franchise locations in your company, you may be subject to these penalties if:
- You don't provide adequate and affordable coverage to all full-time employees and their dependents; and
- One or more full-time employees receives a premium tax credit after obtaining coverage through a health insurance exchange.
Consider working with your tax and legal team for additional clarification on how this mandate applies to your particular franchise.
Plan for future laws affecting health insurance for franchise owners
It's important for franchise owners to closely monitor current regulations, deadlines, and new laws that could affect them. The individual mandate change went into effect at the beginning of 2019, and more changes could happen, which is why it’s important to minimize uncertainty in this environment and avoid unnecessary penalties.
4 healthcare open enrollment management strategies for your franchise business
To navigate franchise healthcare open enrollment, you'll need to have a plan to keep in compliance with ACA requirements without distracting from your core business operations. Start the process early and organize your efforts by considering the following strategies:
1. Calculate your franchise's health insurance requirements
To properly fulfill your healthcare requirements to your employees, the ACA requires that you calculate the number of full-time employees on your payroll. To avoid loopholes and questionable business practices that would allow some dishonest business owners to avoid providing health care to their employees, the ACA has outlined very specific steps for calculating the employees who are categorized as full time for health insurance purposes.
Failure to follow these steps or accurately calculate the number of qualified employees (full-time and full-time equivalent employees) can result in fines, penalties, and even labor lawsuits. If this calculation reveals that your franchise business has at least 50 full-time or FTE employees, you are considered an applicable large employer (ALE) and must offer health insurance coverage to all your full-time employees and their dependents, that is affordable and meets minimum standards set by the ACA, or risk being assessed a potential penalty. (Full-time equivalents don't have to be offered insurance coverage.)
2. Choose health care for your franchise
There are several different healthcare programs that meet the specifications set forth by the ACA. To select the most cost-effective plan for both you and your employees, take the following steps:
- Discuss healthcare options with your staff. Before selecting the insurance plan(s) you will offer your full-time employees, you may want to talk with your full-time staff. By exploring their needs and special considerations, you can ensure that your chosen health plan will serve as a good employee retention incentive as well as a way to recruit top talent.
- Consider the costs. Providing healthcare for franchise employees is certainly a cost to your business, but it's also a cost to your workforce. Consider both sides and choose add-ons or deductible options carefully. Make sure your company isn't paying for coverage that isn't valuable to your employees, but also make sure your efforts to save money aren't saddling your employees with unmanageable deductibles and out-of-pocket expenses.
- Decide on a health plan. As a franchise owner, you have several plan options for providing coverage to your employees. You can choose from group or individual plans, although group plans are likely to be more cost-effective for employee groups of 50 or more. Even within group plans, however, you can choose from HMOs, PPOs, high-deductible health plans (HDHPs), and other specialty group options.
- Talk to an insurance agent. Partnering with a reputable insurance agent who specializes in franchise-sponsored healthcare plans can save you a considerable amount of time and frustration. A good agent can help navigate the healthcare landscape for you and provide the most cost-effective options that meet your business needs, shopping around on your behalf to find the best price across several different companies instead of being tied to a single insurance provider.
3. Keep an eye on the calendar
Like many government-regulated programs, there is very little wiggle room on registration and requirement deadlines. Keep any and all franchise healthcare open enrollment dates on a calendar where you can refer to them often. Failing to meet deadlines can cost your franchise thousands of dollars in late fees and penalties. Missing important deadlines can also leave your employees at risk of going without proper medical coverage.
Once you have the submission deadlines, work backward from those dates to determine what deadlines you will set for franchise employees. Give yourself plenty of time to:
- Evaluate which options you will offer employees.
- Share the available options with those employees who qualify.
- Collect election forms.
- Make any necessary calculations for your employer contributions.
- Submit any payments and paperwork by the specified deadlines.
If your franchise is considered an ALE, you have several applicable requirements for tracking and reporting offers of healthcare to employees. Specifically, 1094-C and 1095-C forms must typically be filed on or before February 28 of the calendar year following the open enrollment period. These deadlines are subject to change, but employers can receive an automatic 30-day extension by submitting Form 8809 in a timely manner. As you can see, there are many steps when it comes to open enrollment, so it's important to stay organized from the beginning.
4. Communicate with franchise employees
Once decisions have been made and your franchise healthcare open enrollment offerings have been selected, you'll need to communicate these options to any qualifying franchise employees. To minimize confusion and help employees feel good about benefits offerings, take these proactive steps:
- Educate yourself and get prepared for questions. Your employees are likely to have many questions, especially if this is their first year of eligibility. Be prepared with detailed written explanations of coverage options and benefits, and offer guidance on how to choose the best plan for an employee's individual situation and how to then get enrolled. Consider providing a video tutorial or similar resource for new employees.
- Ask your agent to meet with your employees. You can preempt many questions by providing employees with an open venue for exploring coverage options. Ask your agent to set aside a few rollout days for scheduled sessions where employees can ask any questions directly of the expert.
- Clearly communicate any associated deadlines. It's also important to clearly communicate any associated deadlines to eligible employees. Make sure these dates are prominently displayed on any and all registration paperwork, and plan to send frequent reminders of deadlines through multiple channels (email, bulletin boards, etc.). This will help to avoid the hassle of having to chase down employees who failed to submit their paperwork — or dealing with disgruntled workers who miss the deadlines.
Developing a healthcare plan to benefit both you and your franchise employees
Navigating franchise health insurance requirements under the ACA can be challenging, but it’s not impossible. The time you invest in developing your healthcare enrollment strategy can help benefit both you and your employees. To learn more about how smart human capital management can benefit your business, check out these franchise solutions.
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