The post below is a guest blog from Dax Hill who serves as the Principal, Health & Welfare Consultant for CAI’s employee benefits partner, HCW Employee Benefit Services.
There is a book titled “Hope Is Not a Strategy.” I believe this statement to be particularly true regarding the Healthcare Reform “Pay or Play” mandate. This regulation will require great attention as employers determine their future path in offering employee benefits.
As you are probably aware, the following penalties will apply to employers with 50 or more full-time equivalent employees, effective 2014:
1) If you provide no group medical insurance: you will pay a $2,000 per employee per year penalty. The first 30 employees are exempt from the penalty.
2) If you provide unaffordable insurance coverage: applies to employees making between 100% and 400% of the Federal Poverty Level (400% of the FPL equates to a single employee making ~$44,000) AND EITHER your group medical insurance plan provides less than 60% value OR payroll deductions for employee-only coverage are more than 9.5% of the employee’s W-2 income. If one of these employees receives a subsidy through the state exchange, the penalty will be subject to the lesser of: 1) a $3,000 penalty per employee receiving a subsidy through the insurance exchange OR 2) $2,000 for all employees (the first 30 employees are exempt from the penalty).
Have you asked yourself the following questions?
- How will the government penalties impact us if we don’t offer group medical insurance?
- What will be the financial impact if some employees opt out of our group medical insurance plan and purchase individual coverage through the state insurance exchange?
- Should we drop our employer-sponsored coverage all together and direct our employees to the exchange? If we go this route, how are we going to differentiate ourselves as an employer?
- Or, are we better off continuing to offer our group medical insurance plan?
So, which approach are you taking?
- “Let’s wait and see…hopefully this will all go away” approach while waiting for the Supreme Court’s decision before analyzing what type of impact the Play or Pay mandate will have on your company.
- “This doesn’t apply to my organization” so I have no reason to consider options related to this mandate.
- “Let’s plan now in order to determine which options would provide us with the best possible outcome,” I want to make sure I have a great plan to make this a competitive advantage as possible for my organization.
While 2014 seems so far away, it is not. Many employers are currently planning for the future and determining which option provides the most favorable outcome based on today’s regulations. HCW is helping employers quantify those scenarios. These are just a couple of different scenarios employers are considering:
1) Stay the course on our current medical insurance plan.
2) Drop coverage and pay the penalty for all employees. This could be most disruptive and provide no perceived value to the employees. Additionally, higher compensated employees might not be eligible for any subsidy, which would be a negative impact.
3) Offer a high/low option for all employees and base the premium contribution on the base plan.
4) Adjust the “employee-only” premiums in order to meet the 9.5% threshold and prevent any penalties.
5) Redistribute the premiums from Family to Employee-only coverage to meet the 9.5% threshold.
6) Have employees work less than 30 hours in order to avoid penalties.
7) Add all employees to the plan and adjust other forms of compensation to balance the budget.
So, will you Pay or Play? There are many more solutions to consider. The key is to QUANTIFY possible solutions that align with your culture and the direction of your organization. This will enable you to make educated decisions around this important benefits strategy. It’s time to think strategically and not rely on hope. What steps have you taken to map out a plan?