Health Care and Employers in 2013
Up until now, most of the news about the Affordable Care Act (ACA) centered around the individual mandate requiring all people to have health insurance. But there’s another ACA mandate, the employers’ mandate, requiring companies to make health insurance available to their employees. Although the full implementation of the health reform law isn’t until January 1, 2014, companies must take actions this year to comply with the law; and these actions will effect the people who work for them. Original estimates saw smooth compliance and little disruption in connection with this mandate. Predictions now see something else. They see companies reducing work hours, cutting their work force, raising workers’ costs for health insurance, and some even dropping health benefits altogether.
According to the health reform law, companies with at least 50 Full Time Equivalent (FTE) workers must pay a penalty if they don’t offer their full-time employees government approved health insurance. However, the hours of part-time workers are used in determining the number of full-time employees. The weekly hours worked by both full-time and part- time employees are added up and divided by 30 (the number of hours a week one full-time employee would work under the law) If the result is less than 50, that company is not obligated to provide workers’ with health insurance.
However, if the hourly calculation results in more than 50 FTE, a lot more questions need answering. If the company doesn’t offer any health insurance and at least one employee qualifies for a government subsidy, that employer must pay a penalty each year of $2000 times the number of FTEs minus 30. A company with just one employee over the 50 FTE threshold would pay $42,000 the first year. ($2000 X (51 – 30 = 21)) This penalty will increase every year along with the relative cost of health insurance.
If a company has more than 50 FTE, does offer employees health insurance but doesn’t cover at least 60% of health care expenses or if employees must pay more than 9.5% of their income for coverage, the employer is still on the hook. The company employees must then be offered another option. They can purchase health insurance from a government run exchange and receive a premium tax credit. If they accept, the company must then pay a $3000 penalty every year for every employee receiving a tax credit, up to a maximum amount of $2000 times the number of the company’s FTE minus 30. This penalty will also rise every year to match any increase in the cost of health insurance.
Small companies employing part time, low-skilled help and operating under a tight profit margin need to evaluate their financial prospects under the ACA employer mandate. Will they limit hiring and reduce work hours to keep under the 50 FTE limit to avoid penalties and the added expense of health care benefits? Human resource experts say many will. Nearly half of all retailers, restaurants and hotels are in this category as well as most franchisees. This has the potential of effecting the very people who can least afford it.
Meanwhile, health insurance costs are going up for all companies. Somehow ‘experts’ failed to see that providing free preventive medical treatments, covering 26 year old ‘children’ on parents insurance, eliminating the annual limit that insurers must cover, and other regulations plus a tax on insurance companies would effect the cost of even large group health insurance. The Congressional Budget Office (CBO) and other analysts originally saw little danger that companies would drop expensive health care benefits for their employees and just pay the much cheaper penalty. Now it’s become a very real possibility. The CBO now expects employers will dump coverage for 7 million workers, double its previous forecast, and admits the figure could be as high as 20 million.
To deal with higher insurance costs, many large companies, while not dropping coverage altogether, are raising employees’ share of the cost this year, according to a Kiplinger report. Other companies are planning to replace conventional health benefits with consumer directed health care plans that provide incentives for employees to make more value-oriented health care decisions. The most popular version has employers contributing to tax-free Health Savings Accounts (HSAs) that workers can use for day to day medical expenses or save for future medical needs. Large medical expenses are covered by a cheaper high deductible or catastrophic health care policy provided by the employer.
We were famously told that if we liked our health insurance plan, we could keep that plan. I don’t think so…. not after this year.