Should we play or pay? Larger employers are trying to figure out how to deal with the Affordable Care Act's "Employer Shared Responsibility Provision," which requires applicable large employers to either offer health insurance in 2015, or else pay a tax penalty. The Employer Shared Responsibility Provision goes into effect in 2015 for employers with 100+ employees, and goes into effect in 2016 for employers with 50-99 employees.
But what large employers should be asking is: how can I take advantage of the Affordable Care Act (ACA) individual insurance premium tax subsidies and actually save money on health care costs?
Play or Pay Defined
First, what does play or pay mean? Play or pay is a concept that requires employers with over 100 FTE employees to provide health insurance to their employees in 2015 ("play") or pay a tax or premium toward a publicly provided system that covers people without private insurance ("pay"). The ACA play or pay requirement is also referred to as the "Employer Shared Responsibility Provision" or "employer mandate."
The Play or Pay Decision ... and How to Play Differently
Many employers are asking should we play, pay, or play differently with a premium reimbursement program? The decision is not always easy or straightforward. Ultimately, employers want to provide a health benefit that is valuable to employees (i.e. recruitment and retention), and has value to the employer (i.e. the best benefit for the cost).
There are three choices a larger employer has: to play, to pay, or to play differently with premium reimbursement.
To play means your company would offer employees health insurance that meets essential health benefits and is affordable to employees, by ACA standards.
To pay means your company would choose to not offer health insurance and instead pay a tax penalty. Remember, the penalties are being phased in and start in 2015 for employers with 100+ FTE employees, and in 2016 for employers with 50-99 FTE employees.
To play differently is the middle ground between play and pay. It means your company chooses not to offer a group health insurance plan, pays any applicable penalties, and instead offers employees a health benefits allowance. Employees purchase policies from an insurance agent, online, or through the Health Insurance Marketplaces. Then, the company reimburses employees for their policies, up to the amount of their allowance.
Why Would an Employer Play Differently?
An employer would consider playing differently because it will likely:
Save employees and employers a combined 50% on health insurance costs.
Allow employees a full choice of health insurance plans.
Provide employees with better, more flexible health insurance options.
With the new Individual Health Insurance Marketplaces (guaranteed-issue and affordable because of the insurance premium tax subsidies), premium reimbursement plans now have all the same benefits of a group health insurance plan at a lower cost for the employer and employees.
Premium Reimbursement & Employee Health Insurance Cost Analysis
To decide whether to play, pay or play differently with a premium reimbursement program, larger employers should conduct a simple cost analysis. Compare the cost (and benefits) of the three options:
Qualified, affordable group health insurance
Premium reimbursement program + applicable penalties
Fewer than 100 Employees? No Play or Pay Decision in 2015
If your company has fewer than 100 employees, the mandate and tax penalty (and thus the play or pay decision) does not apply to you. With the new Health Insurance Marketplaces and insurance tax subsidies, many small and medium sized employers are:
Dropping their group health insurance plan (if they have one).
Allowing employees to purchase policies through their state Health Insurance Marketplaces and be able to take advantage of individual tax subsidies.
Reimburse employees for their premiums (or a portion of their premiums) through the premium reimbursement program. See: 2 Ways Employers Can Contribute to Employees' Personal Health Plans.
What questions do you have about the ACA play or pay decision in 2015?