January 2015 marks the start of the employer mandate of the Affordable Care Act for companies with 100 or more full time employees.
The mandate, also known as the “pay or play” or “shared responsibility” provision, requires employers to offer minimum value coverage that meets affordability and minimum value requirements or else pay a tax penalty.
Minimum value, meaning coverage that fulfills the ten essential benefits and has no annual or lifetime limits, can essentially be met with any employer-provided coverage. To be affordable, premiums for employee coverage must not exceed 9.5 percent of his or her household income and employer cost sharing must cover 60 percent of the expected total cost of benefits.
The mandate goes into effect for companies with 50 or more full time employees as of January 2016, though steps are already being taken in Congress to make alterations to the requirement.
What some companies may realize, though, is that it could be more fiscally beneficial to accept the tax penalty and allow employees to go on the marketplace, where they can receive government subsidies.
This is because there are a number of limits on the tax penalty, which may make it less expensive than if an employer were to cover the higher cost of employee benefits without government subsidy.
For example, should an employer provide coverage that is unaffordable, the fee is the lesser of:
– $3,000 per employee receiving a subsidy
– For companies with 50 employees or more, $2,000 per full-time employee, after the first 30.
– For companies with 100 employees or more, $2,000 per full-time employee, after the first 80
It’s a delicate balancing act, but for many small to medium sized business it could mean the potential for hundreds, or even thousands, of dollars of savings monthly.
ClaimLinx helps companies navigate through these and other options for saving money on health insurance everyday. If you would like to hear options available for your business, schedule an appointment with one of our consultants today.