As the political and media commentary over the U.S. Supreme
Court's decision to uphold the accountable Care Act
("ACA") winds down, the focus returns to how
"Obamacare" works and what it means. The business
community has been able to avoid the real work of analyzing and
implementing Obamacare's mandates. Many hoped that either a
Supreme Court decision or a Republican-controlled Congress would
repeal or reduce Obamacare's impact on the employer mandate.
Many decided to wait, as the bulk of the employer health insurance
obligations do not activate until 2014. Now, with Chief Justice
John Robert's surprising (at least to many) majority opinion,
the days of waiting and avoiding are over.
For most businesses, the health insurance requirements apply to
those with 50 or more employees. Those with 25 employees or less
are in a different, tax-credited universe. The silver lining for
small companies is the federal credit for health insurance
(although there is a $50,000 salary cap).
While the hot topic of the Supreme Court's decision was the
"individual mandate," its impact is relatively small
compared to the struggle facing employers. At a time when
employer-sponsored health insurance is declining, Obamacare
forcibly reverses that trend. All employers face the critical
decision of whether to:
Continue to provide health insurance from the current insurance
Refuse to provide health insurance and face penalties, but risk
loss of valuable employees to competitors
Utilize the state insurance exchanges and tax credits (for
Provide employees with health insurance subsidies to allow them
to access the mandated health insurance exchanges
Offset the flexible spending account limit of $2500 under PPACA
with other benefits (or salary increases)
Restructure "Cadillac" benefit plans for
Consider whether the business can run on less than 50
Employers with 50 or more employees must provide
"affordable" health insurance or face a penalty of $2000
per employee (the first 30, however, are exempt). Simple economics
suggests that employers, whose average cost for individual coverage
was $4,500 ($11,000 for families) in 2011, would favor dropping
coverage altogether and paying the penalty. But, employers could
risk loss of key employees to competitors, and there would be
pressure to make up the difference in lost health insurance
benefits with increased compensation.
Additionally, employees cannot be required to contribute more
than 9.5 percent of their household income to health insurance, but
how will that be verified? Can employers ask non-employee
spouses/household members to show proof of income? With health
insurance premiums still rising at rates far exceeding the CPI, how
do employers make health insurance "affordable" for
employees but not financially perilous for employers?
This article appeared in the July 23, 2012 issue of the
Orange County Business Journal.
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