Health Care: At What Cost?
The Patient Protection and Affordable Care Act (PPACA), also known as “Obamacare,” has been upheld by the United States Supreme Court and will affect all Americans as it is implemented. The leadership of churches and ministries across the country need to understand how the provisions of PPACA will affect them.
PPACA requires employers who employ an average of 50 full-time employees during the previous year to provide health insurance coverage for all of its employees. Churches and other tax-exempt organizations are not exempt from this provision. A full-time employee is defined as an employee who works an average of 30 or more hours per week. Thus, any church, including any ministries which are not separately organized, employing 50 or more full-time employees must provide health insurance to all of its employees.
If an employer has 50 or more employees, then it has the option of providing coverage or paying a penalty. If the employer wants to avoid the penalty, then the employer must provide at least 60% of the premium cost of insurance coverage that is at least “minimum essential coverage” for employees.
Employers with fewer than 50 employees are not subject to PPACA and are NOT required to provide health insurance to its employees. However, should a small employer decide to provide health insurance to its employees, then it may receive a refundable tax credit for premiums provided on behalf of employees. Tax-exempt employers, such as churches, are able to receive a refundable credit of up to 25% of premiums paid for health insurance. However, the credit is limited to the total amount of income and Medicare taxes required to be withheld from employees and the employer’s share of Medicare taxes withheld for the year. For an employer to be eligible for the credit, the employer must:
(1) pay at least half of the cost of insurance premiums for its employees;
(2) have fewer than 25 equivalent employees (including the pastor(s) in the count); and
(3) average annual wages of less than $50,000 per employee (without counting the salary of any of its pastors).