Post-Election: Employers Need to Review Options for PPACA in 2014

Obama Meets Doctos in Oval Office

Whether you are red or blue, we now know it is unlikely the Patient Protection and Affordable Care Act (PPACA) will be repealed or significantly altered with President Obama being reelected and the Senate staying in Democratic control.  For employers, 2014 and the implementation of the “Pay or Play” mandate is now looming on the horizon. 

The “Pay or Play” Mandate

The mandate requires employers with 50 or more full-time employees—or the equivalent—to offer a minimum benefit package to their full-time employees (those working an average of 30 hours per week or more). The coverage must be affordable, meaning that it costs employees no more than 9.5% of their household income.

If the employer fails to meet these requirements, the organization is potentially subject to a penalty.  That can range from $250 per month ($3,000 per year) for each employee not offered an affordable (for the employee coverage) minimum value plan, to $167/month ($2000 per year) for all full time employees (less the first 30) if the employees are not offered a minimum value plan at all that covers both employees and their dependents.

Plan for the Mandate Now

It is important to reiterate that even though the options are discussed as Pay or Play, the decisions are NOT so binary.

Since PPACA is going to be with us for the foreseeable future, employers have to be ready for 2014.  The planning starts now!  Yes, the publicity has been around employers looking at one of two approaches:

  1. Employers seeking to avoid coverage entirely, accepting the penalty, and telling employees to get coverage through state exchanges, or
  2. Employers being forced to offer current benefits to part-time employees who never had coverage before, and potentially increasing the organization’s health care costs by an unsustainable amount.

However, there are potential alternative options and strategies that may result in less costly outcomes for employers.

Less Expensive Options for Employers

Federal agencies have not provided enough guidance for a detailed determination of all possible options, but those options are known at least in a directional way.  In particular, employers should be able to offer a low-cost plan that meets the minimum value test and make it affordable for low-wage employees.  If employees elect coverage, there would be an associated cost to the employer.  However, in most cases it will be much less than the application of the penalties.  In addition, it is unlikely that all, or even a majority of those employees, will actually elect the offered coverage.  This is just one option employers have to structure their plans and contributions in ways that can limit potential costs while still providing the mandated benefits and avoiding the penalties.

Preparing a PPACA strategy is not just a two-part option, it is important for employers to review all their options to prepare for 2014.

Learn More in Our Webinars

Hear more about options and strategies for preparing for PPACA in our webinar: The Effects of the Presidential Elections on Benefits: An Initial Reaction (audio only).  We’re planning a second webinar on this topic for December 18, 2:00 ET: Effect of the Presidential Election on Benefits: Looking to the Future.  If you’re interested in attending, you can register for it here.

About Jay Kirschbaum

Jay spent 22 years as a tax attorney specializing in employee benefits before joining Willis in 2001. He is current…
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