The Long Arm Of The U.S. Healthcare Ruling


The Supreme Court ruling to uphold the core of President Barack Obama's 2010 healthcare law has wide-ranging political and economic implications.

Here is a snap analysis of what it means for Americans, healthcare providers, insurers, the law and the presidential campaign.

How does the ruling affect the average American?

* Working families with annual household incomes up to nearly $90,000 will be able to purchase private insurance through new state insurance markets at prices subsidized according to income level, beginning in 2014. But people with household incomes of around $29,000, who qualify for coverage under the Medicaid government health insurance program for the poor, may have to wait for their respective state governments to decide whether they will join the program's huge expansion. Preventive healthcare measures including mammograms and other cancer screenings will be available without deductibles or co-pays. Adult children up to age 26 can remain on their parents' health insurance plans. Senior citizens can expect to continue receiving discounts on prescription drugs aimed at closing the Medicare coverage gap known as the "doughnut hole." Health insurers will continue to pay rebates on premiums not sufficiently targeted at healthcare services. Beginning in 2014, insurers will no longer be able to deny coverage to adults with pre-existing medical conditions and would be required to stop or curb discriminatory pricing based on gender, age and health status.

What about healthcare providers?

* The ruling removes one cloud of uncertainty over the future of healthcare reform and would help the administration's efforts to implement it fully by January 1, 2014, when the law is scheduled to go into effect. Under the decision, physicians and hospitals continue to move away from the traditional fee-for-service healthcare business model and toward more efficient systems that coordinate care. For healthcare providers, the affirmation represents millions of potential new patients, either through private plans or the government's Medicaid program for the poor. Some, however, would be under added pressure to enact more savings, which could cut into revenues. The administration still faces some fairly tall hurdles, such as establishing regulated health insurance markets in all 50 states so consumers can purchase subsidized coverage. Up until now, over a dozen states have done little or nothing to create such exchanges, partly because of the uncertainty over the fate of the law. Down the road, if Republicans succeed in taking control of the White House and the Senate in November (they already control the House of Representatives), they would likely try to repeal the law in 2013.

Where does the ruling leave health insurers?

* The health insurance industry can expect premium revenue from millions of new, healthy customers through state exchanges. But the industry will also have to operate with new consumer protections that require coverage access for people with pre-existing medical conditions and other health status issues, and mandate preventive care without customary charges.

How might the ruling influence the presidential campaign?

* This is a big victory for Obama, who has weathered years of criticism from conservatives about his reforms. The decision could energize the president and his supporters, while undercutting presumptive Republican presidential nominee Mitt Romney, who introduced similar reforms as Massachusetts governor but opposes their use as national policy. But there could be a silver lining for Republicans: the opinion could light a fire under party candidates and constituents who want a president who would repeal the law in 2013.

(Reporting by David Morgan and Lewis Krauskopf; Editing by Michele Gershberg and Will Dunham)


The Affordable Care Act requires health insurers to spend a minimum percentage of their premium dollars on medical claims and quality improvement.  Insurers in the large group market must achieve a medical loss ratio (MLR) of 85%, while insurers in the individual and small group markets must achieve an MLR of 80%.  Insurers that fail to achieve these percentages must issue rebates to their policyholders.  The first of these MLR rebates are due in August of 2012, so plan sponsors should begin planning how to handle any rebates they might receive.


Which Plans Are Covered?

The MLR rules apply to all fully insured health plans (even grandfathered plans).  Self-funded plans are exempt.  Certain types of insured coverage, such as fixed indemnity, stand-alone dental and vision, and long-term disability, are also exempt.

If a rebate is payable to a group policyholder, the insurer must issue a single rebate check to the plan.  The plan sponsor must then decide whether and how to pass the rebate on to the plan's participants.

Calculating a Medical Loss Ratio

The calculation of an MLR is not specific to each policyholder, but is a state-by-state aggregate of the insurer's overall MLR within a particular market segment (e.g., individual, small group, or large group).  Thus, even if a specific employer plan has a low MLR (i.e., favorable claims experience), the employer may not necessarily receive a rebate.

States are permitted to set higher MLR targets.  In those states, insurers must comply with the more stringent state requirements.

Notices to Subscribers

Insurers must send written notices to their subscribers, informing them that a rebate will be issued.  Plan sponsors should be prepared to respond to questions from participants who receive these notices, particularly if the sponsor does not intend to share any of the rebate with those participants.

Likewise, even if an insurer meets the MLR requirements, it must notify subscribers that no rebate will be issued.  This notice must be included with the first plan document provided to enrollees on or after July 1, 2012.  Model notices<> are available on the Centers for Medicare & Medicaid Services website.

How to Allocate MLR Rebates

The Department of Labor (DOL) issued Technical Release 2011-04<>, summarizing how ERISA plan sponsors should handle MLR rebates.  To the extent that all or a portion of the rebate constitutes a "plan asset," the sponsor may have a fiduciary duty to share the rebate with plan participants.

In the absence of specific plan or policy language, the determination of whether an MLR rebate is considered to be a plan asset will depend, in part, on the identity of the group policyholder.  If the plan or trust is the policyholder, the MLR rebate will likely be considered a plan asset under ordinary notions of property rights.

However, if the employer is the policyholder, the determination will hinge on the source of the premium payments and the percentage of premiums paid by the employer, as opposed to plan participants.  If the premiums were paid entirely out of plan assets, the DOL's view is that the entire amount of the rebate would be considered a plan asset.  In other circumstances, only the portion of the rebate that is attributable to participant contributions will be considered a plan asset.

If all or a portion of a rebate does constitute a plan asset, then the plan sponsor will have to determine how and to whom to allocate the rebate.  For example, must a portion of the rebate be allocated to former plan participants?  The selection of an allocation method must be reasonable and it must be made solely in the interest of plan participants and beneficiaries.

However, a plan fiduciary may weigh the costs to the plan - and the ultimate plan benefit - when deciding on an allocation method.  Thus, for example, if the cost of calculating and distributing shares of a rebate to former participants approximates (or exceeds) the amount of the proceeds, a fiduciary is permitted to limit the allocation to current plan participants.

Similarly, if it is not cost-effective to distribute cash payments to plan participants (because the amounts are de minimis, or they would produce negative tax consequences for the participants), a fiduciary may use the rebate for other permissible plan purposes.  These might include a credit against future participant premium payments or benefit enhancements.

Tax Consequences

Before deciding to pass an MLR rebate on to participants, a plan sponsor will want to understand the tax implications of doing so.  The IRS has issued a set of questions and answers<,,id=256167,00.html> on this topic.  Because this guidance is entirely in the form of examples, with few general principles provided, the tax treatment may not always be clear.  What is clear is that a number of factors will affect the taxability of an MLR rebate.

For individual policyholders receiving an MLR rebate, the IRS treats the rebate as a return of premiums (i.e., a purchase price adjustment).  As long as the premium payments were not deducted on the individual's federal tax return, the MLR rebate should not be taxable.  However, if an individual did deduct the premium payments, the MLR rebate will be taxable to the extent the individual received a tax benefit from that deduction.

For participants in a group plan, the tax consequences will depend on factors such as the source of the premium payments (employer versus participant), whether participant premiums were paid on an after-tax or pre-tax basis, and whether a participant who paid premiums on an after-tax basis later deducted those premiums on his or her federal income tax return.

Another key factor is whether the rebates are passed through only to participants who participated in the plan during both the year to which the rebate relates and the year it is received, or to all participants who participate during the year the rebate is received (i.e., without regard to whether they also participated during the year to which the rebate relates).

For instance, if a participant paid premiums on an after-tax basis and the MLR rebate is specifically conditioned on the participant having participated in the plan during both the year to which the rebate relates and the year it is received, any rebate allocated to that participant will generally not be taxable - regardless of whether the rebate takes the form of a cash payment or a reduction in future premium payments.  However, if the participant claimed a tax deduction for the premium payments (as might be the case for a self-employed individual), the rebate will be taxable to that participant.

On the other hand, if an MLR rebate is passed through to all current plan participants (regardless of whether they participated in the plan during the year to which the rebate relates), the rebate should not be taxable even if a participant took a tax deduction for premiums paid during that year.

Finally, if a participant paid premiums on a pre-tax basis (i.e., through a cafeteria plan), the return of those premiums - whether received in cash or as a credit against future premiums - will be subject to both income and employment taxes.


The U.S. Supreme Court upheld the individual mandate and most of the Patient Protection and Affordable Care Act (PPACA).  As expected, it was a close decision -- 5-4 -- with Chief Justice Roberts and Justices Breyer, Ginsburg, Kagan and Sotomayor agreeing that the individual mandate is a permissible tax. Because the individual mandate was found to be acceptable, most of the rest of the law (including the exchanges and the requirement that larger employers provide minimum coverage or pay penalties of their own) automatically stands. 

Because PPACA has been upheld, employers need to move forward with implementing the changes required by the law.  The most immediate requirements are:

  • All group health plans, regardless of size, must provide "summaries of benefits coverage" (SBC) with the first open enrollment beginning on or after Sept. 23, 2012.  The content and format of these SBCs must meet strict guidelines, and the penalties for not providing them are high (up to $1,000 per failure).  Insurers will be expected to provide the SBCs for fully insured plans, while self-funded plans will be responsible for preparing their own.
  • Employers that issued 250 or more W-2s in 2011 must report the total value of each employee's medical coverage on their 2012 W-2 (which is to be issued in January 2013).
  • High income taxpayers (those with more than $250,000 in wages if married and filing jointly, or more than $200,00 if single) must pay additional Medicare tax, and employers will be responsible for deducting a part of the tax (an additional 0.9 percent on the employee's wages in excess of $200,000) from the employee's pay beginning in 2013.
  • The maximum employee contribution to a health flexible spending account (FSA) will be $2,500 beginning with the 2013 plan year.
  • The Patient Centered Outcomes fee (also called the comparative effectiveness fee) is due July 31, 2013.  The fee is $1 per covered life for the 2012 year.  Insurers will remit the fee on behalf of the plans they cover, while self-funded plans will pay the fee directly.

Politically, while House Republicans have pledged to repeal PPACA, it is unlikely a repeal bill would pass the Senate, and it would be vetoed in any event by President Barack Obama.  The fall elections, of course, could result in a change in control of Congress and/or the White House, and Republican victories would likely re-energize efforts to repeal PPACA or to discontinue funding needed to implement various parts of the law.

The opinion is long (193 pages) and complex, and we will provide additional details -- through both written alerts and a webinar -- once there has been more time to study the opinion.  

Mixed Small Business Reaction to Health Ruling

By Emily Maltby and Sarah E. Needleman

If there’s one thing many small-business owners can take away from the Supreme Court’s decision to uphold the Affordable Care Act, it’s a little more certainty.

Consider Richard Balka, owner of The Home Rubber Company L.P. in Trenton, N.J., which offers health insurance to its 37 employees. He said Thursday that he was pleased that the Supreme Court upheld the provision that ensures people can get coverage despite having a pre-existing health condition.

“That freed my conscience in the event I have to stop offering health care to my employees,” he said. “If I had dropped it, anyone who either had a pre-existing condition or family member with a pre-existing condition would be in a horrible position.”

The Supreme Court voted 5-4 to uphold a provision requiring taxpayers to carry health insurance or pay a penalty. The majority opinion, by Chief Justice John Roberts, found that the penalty effectively functioned as a tax, by increasing the income taxes of those without qualifying insurance, and was therefore justified under Congress’ constitutional power to levy taxes and provide for the general welfare.

Of course, the decision still leaves small-business owners wondering how the law will impact the cost of health care.


Some expect the law to lead to lower health-care premiums, with the cost of health care spread among a larger pool of insured Americans. Others, though, predict that premiums will rise and worry that they’ll be forced to provide coverage that they can’t afford, starting in 2014, when many of the law’s key provisions take effect.

Even Mr. Balka said he is still concerned that health exchanges, expected to roll out at the state level come 2014, “may not go far enough” to curb the cost of providing insurance to employees.

Premiums at the rubber-manufacturing facility have increased between 8% and 20% each year in the last 15 years.

Makini Howell, owner of Plum Bistro, a group of four vegan restaurants in Seattle, had no reservations about Thursday’s ruling. “It’s a good thing it wasn’t shot down because we wouldn’t be able to offer coverage,” she said.

Plum Bistro began offering insurance to its eight full-time employees about three months ago. Ms. Howell credits a small-business tax break that rolled out as part of the law as one reason for her ability to offer insurance. She is also looking forward to the health exchanges, which, she believes, could “level the playing field for us.”

Some small-business owners say the law doesn’t affect them now, but voiced concern about how provisions of the law might impact their plans to add to their payroll as they grow.

Elie D. Ashery, president of Gold Lasso Inc., a 10-year-old Gaithersburg, Md., marketing firm, currently has 25 employees and is growing fast, he said. He thinks the law will only push premiums higher.

Though the firm offers health insurance, its premiums have been rising by 26% on average annually over the past four years, he added.

If the firm’s headcount rises above 50, then it might turn out to be less costly to pay a penalty than continue to provide health insurance. “It’s an option I’d have to consider,” he said.

Ruling Lifts Cloud of Uncertainty Over Health Industry

By Ron Winslow

The Supreme Court’s decision largely upholding the Accountable Care Act lifts a huge cloud of uncertainty over the health-care industry and sets companies and hospitals back on a course to prepare for the bulk of the law’s implementation over the next two years.

As WSJ’s Anna Mathews reports: One-sixth of the U.S. economy just started breathing again.

Health insurers and hospitals were already embarked on a host of strategic changes to prepare for the law as well to respond to as growing pressure in the marketplace to contain costs and improve quality of care.

The decision affirms hospital initiatives that were launched even before the law was passed in 2010 to consolidate and make strategic investments in outpatient clinics and information technology, as WSJ’s Chris Weaver reports.

“We’ll have 32 million potential customers who will come in, get treatment and pay,” saysAlan Miller, the chief executive of Universal Health Services, a hospital operator. “Previously, they got good treatment, and said, ‘we can’t pay.’”

Meantime, the pharmaceutical industry is generally pleased with the decision as it supported the law and also stands to gain from tens of millions of new insured.  But that will be offset by billions in fees and other concessions.

Investors reacted to the decision by bidding up hospital stocks while punishing health insurers’ shares in a broadly down market.  Pharmaceutical, biotech and medical device stocks also generally fell.

To be sure, while the law’s constitutionality was upheld in today’s decision, the political debate is further inflamed ahead of the November election, which means additional uncertainty lies ahead.

Employer Penalties Under Healthcare Reform

By Joe Giangola

One of the most misunderstood areas of Healthcare Reform has been the mandating of coverage and the associated penalties for employers.  There is a lot of confusion as to who the mandates will apply to, when they will begin and who must be covered.  Fortunately the mandates do not begin until 2014, which should give employers ample time to prepare.

Company Size and Who is Affected?

Let's take a look at who will be affected by the law.  The PPACA (Patient Protection & Affordable Care Act) mandates will apply to companies with 50 or more full time employees.

How exactly is the company size determined?   The employer must employ 50 or more full time employees for 120 or more days in the preceding calendar year.  So your number of employees in 2013 will determine whether the law applies in 2014.

An employee is considered full time if they work an average of 30 or more hours per week.  The law also takes into account part time employees as they are counted as full time equivalents.  Part time employees are used to help determine who must comply with the law but are not used in the calculation of the penalties.

Who and what must be covered?

In 2014 an employer must offer minimum essential coverage to all of it's full time employees and their dependents.  Failure to comply will subject the employer to a $2,000 per year penalty per employee over 30 employees.  This can also result if any full time employee receives subsidized coverage through an Exchange.

What will be considered minimum essential coverage?

The Federal Government's office website, , defines Minimum Essential Coverage as follows:

"The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage."

As you can see the law is not clear as to the level of coverage required, your current plan may exceed or fall short of the law's required level of benefits.

Will offering a plan make my company compliant with the PPACA?

First, your plan must meet the, to be determined, essential level of coverage. Second, your plan must be considered "affordable" and offer "minimum value".

Employees who are eligible for coverage through work are able to receive subsidized coverage through the Exchanges created by the PPACA.  An employee may qualify for a subsidy if their income falls below 400% of the Federal Poverty Level, $88,200 per year for a family of four or $43,320 per year for an individual.  The employer must pay 60% of the allowed costs of the coverage and the employees contribution may not exceed 9.5% of their household income.  This number will be virtually impossible for employers to determine since spouses income will be unknown.

The penalty for non-compliance is $3,000 per employee over the first 30.  The penalty cannot be greater than $2,000 per employee for failure to provide coverage.  After 2014 the penalty can be indexed.

Many questions remain unanswered at this time leaving business owners helpless to prepare for the upcoming changes. Be sure to check back often as I will be keeping a close eye on the developing regulations from the Department of Health and Human Services and will help explain the pending clarifications as they are released.

SCOTUS upholds PPACA, industry ready to tackle ongoing health care issues

By Marli D. Riggs
June 28, 2012


 The U.S. Supreme Court has upheld the Patient Protection and Affordable Care Act with the individual mandate being upheld under the Congressional power of taxation.

The Court ruled 5-4 Thursday with Chief Justice John Roberts joining the liberal wing. Roberts in the opinion noted that the individual mandate — the core provision of reform that would pay for many of its initiatives — “is not a valid exercise of the Commerce Clause,” which covers congressional ability to regulate commerce. However, the Court added that Congress has the authority to implement the mandate under the taxing clauses of the Constitution.

Brokers reacted strongly to the ruling, but say while it will take time to fully understand the impact of it on their business and clients, the health care system in America remains broken, with continued rising costs.

“It will likely take several months to sort through the implications, political and otherwise,” says LouAnne Drenckhahn, human resources and compliance consultant at Edina, Minn.-based David Martin Agency. “The current state of our health care system is not a result of PPACA. We have seen the cost of health care rising too quickly and employers exiting the employer-based health care system for years. Our health care system as a whole has not been working as efficiently as it could.”

The Act does not fix the rising cost of health care in this county, adds Perry Braun, executive director of Benefit Advisors Network.

“Insurance market reform, reforming and regulating the distribution and marketing, as well as regulating the development of insurance premiums and how you reimburse and compensate providers are not the only aspect of the cost equation,” he says. “The Act does not address the demand side of the equation, which is where an equal amount of attention should be given.”

Adam Bruckman, president and CEO of Atlanta-based Digital Insurance, the nation’s largest employee benefits-only agency, echoed those statements, saying that the United States “still does not have measures in place to control a [health care] system that is on an unsustainable cost trajectory. If we are to effect meaningful change, we are obligated to devise methods to curb rising expenses.”

Bruckman says that the solution system is a system that produces “engaged” health care consumers that can be achieved through innovation, “not through mandates, regulation and government programs. Evolution must be led by the private sector and requires collaboration between benefits advisors, employers, insurance carriers, providers and consumers.”

Industry organizations were quick to offer their opinion as well about the Court’s decision and cite most specifically the costly compliance burden on employers in America.

“This ruling offers some clarity on the future of the health insurance industry and allows American individuals, families and businesses to adjust to the law,” says Janet Trautwein, CEO of the National Association of Health Underwriters. “While we still have concerns that PPACA does not address the true drivers of health insurance costs in this country, and the law is having a huge and costly compliance burden on American employers, it is our responsibility as industry leaders to move forward within the constraints of the law to help Americans access high-quality, affordable health care.”

Trautwein adds that there are still legislative actions that can be taken to fix parts of the health care law and though they support some of the efforts, NAHU’s focus is to help customers transition to the policies, procedures and regulations PPACA outlines.

“It is imperative that the administration and regulatory agencies provide information in a timely manner on the many aspects of PPACA that remain unclear,” Trautwein says.

National Association of Insurance Commissioners President and Florida Insurance Commissioner Kevin M. McCarty said that they “will continue to work to give regulators the tools they need to ensure a stable health insurance marketplace in the states.  Where the ACA provides states with latitude, regulators will continue to work with insurers, consumer groups and the public to provide the best regulatory framework going forward.”

The ruling leaves intact new health care programs in various stages of implementation, including substantial expansion of community care centers in medically underserved regions, accountable care organizations with coordinated population health management programs, coverage for persons with pre-existing medical conditions, coverage on parental policies for adult children up to age 26, and lower prescription drug costs for many persons, particularly those on Medicare.

Robert Miller, president of the National Association of Insurance and Financial Advisors, says that the organizations  “primary health care reform goal is to ensure access to affordable health services in a sustainable, competitive insurance market without jeopardizing the high quality of care and service expected by consumers.”

NAIFA believes Congressional modification is needed and will ask the following of Congress:

•             Remove agent commissions from the medical loss ratio (MLR)

•             Repeal the CLASS Act

•             Raise or remove the contribution cap for flexible spending arrangements (FSAs)

•             Reverse the 3.8% tax on unearned income (including annuities)

•             Enhance HSA and FSA use

•             Build on the employer-based system

•             Reduce consumer costs

Be sure to tune into EBA’s exclusive web seminar that will be held this afternoon at 2 p.m. EST and will give a detailed review of the ruling and impact analysis for health benefit plan sponsors and advisers. The web seminar will feature a Q&A session with the speakers to provide an opportunity for you to get answers to your most urgent questions.

Check out our new slideshow as employee benefit brokers and consultants across the country react and share their plans for moving forward.

Listen as Diane Boyle, VP of Federal Government Relations at the National Association of Insurance and Financial Advisors, shares the organization’s top priority in this exclusive podcast.

The House will vote on a full repeal of Barack Obama's health care law during the week of July 9, Majority Leader Eric Cantor (R-Va.) said Thursday.

What The Health Care Decision Means for Your Small Business

The Supreme Court decision Thursday upholds the Affordable Care Act. But as a small-business owner, you may wonder what that means for you.

Most of the law's key provisions are set to take effect roughly two years from now, on January 1, 2014.

Based on the ruling, all individuals -- including small-business owners -- must have health insurance starting in 2014, or pay a penalty.

Certainly, the cost of health insurance has become a significant issue for small firms over the past decade.

Overall, about 71% of firms with 10 to 24 employees offered health insurance in 2011, compared with 77% in 2001, according to a 2011 Kaiser Family Foundation survey. Of firms with three to nine workers, just 48% offered insurance in 2011, compared with 58% in 2001.

The high-profile decision is a blow to the National Federation of Independent Business, a Washington, D.C., lobbying group that joined 26 states in fighting the mandate. The NFIB argued that small businesses would suffer if the owners of those entities had to pay for their own health insurance. The NFIB spent more than $1.2 million on the lawsuit in 2010 alone, according to disclosures.

Here's a look at how you might be affected:


Q. What if I am a one-person business?

A. The impact for sole-proprietors and others with no employees will be much like the impact on individuals.

For people in this group, the crux of the 2014 roll-out is the individual mandate, which requires all U.S. citizens and legal residents to have health coverage or pay a penalty.

You, as a one-person business, would buy insurance through your state's benefits exchange that will roll out in 2014.

There are some exemptions, however, such as those from certain religious backgrounds and those who are eligible for the so-called "hardship exemption" if the cost of the annual premium exceeds 8% of household income.

There are penalties intended to ensure compliance. The top penalty for individuals, once fully phased in, for not having insurance is $695 or 2.5% of income -- whichever is greater.

Q. I have employees or may be hiring. What provisions impact me?

A. If you have employees, the health-care provisions are a bit more complicated.

Since 2010, firms with fewer than 25 full-time equivalent employees have been eligible for a tax break if you cover at least half the cost of health insurance. (Full-time equivalent is the number of employees on full-time schedules plus the number of employees on part-time schedules, converted to a full-time basis.)

But only if you have fewer than 10 full-time equivalent employees and average salaries of $25,000 or less is your firm eligible for the full credit. Today, that full credit is 35% of your contribution toward an employee's insurance premium. As your firm size and average wage amount goes up, the tax credit goes down. And once your business hits 25 full-time equivalent employees or $50,000 in average salaries, the credit is completely phased out.

Q. What happens to the tax credits going forward?

A. In 2014, the state-based Small Business Health Options Program Exchanges will be open to small firms. And getting insurance through those exchanges could bump the maximum tax credit to 50% of your contribution, up from the current 35%.

But the tax credits won't last. The credit is only available for a maximum of five years and only two years once the exchanges are up and running.

Q. Will I have to provide health insurance to my employees in 2014?

A. No firm is mandated to provide insurance, but in 2014, only the smallest businesses will be exempt from penalties if they don't.

Q. What are the penalties and under what circumstances would I be exempt?

A. Once your firm reaches 50 full-time equivalent employees, a penalty will kick in if you fail to provide coverage for employees who average 30 or more hours a week in a given month. The penalty is $2,000 for each full-time employee in excess of 30 full-time employees. There are no penalties if part-time employees are not offered coverage.

A key factor in calculating the penalty is that the equation isn't based on full-time equivalents, but rather on actual full-time employees. That means some businesses that are subject to the penalty may end up owing nothing.

Here's a basic example: Say your firm has 25 full-time employees and 50 half-time employees that, combined, equal 25 full-time equivalents. Your firm, in effect, has 50 full-time equivalents and would be subject to the penalty if you don't provide health-care coverage. However, your penalty cost likely would be zero because the $2,000 tally starts at the 31st full-time employee and you only have 25 full-time employees.

Q. What should I know about getting insurance for my employees?

A. You can't just buy any old insurance to avoid the penalty. You have to provide so-called "minimum essential" and "affordable" coverage. Minimum essential coverage means covering 60% of the actuarial value of the cost of the benefits. And affordable means the premium for the coverage of the individual employee cannot exceed 9.5% of the employee's household income.

If the coverage you offer is unaffordable, qualifying employees can get subsidized coverage through the tax credit on the state exchanges. In such a case, you will have to pay the lesser of $3,000 per subsidized full-time employee, or the $2,000-per-employee penalty after the first 30 full-time employees.