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My previous post regarding ACA involved the crunchiness, color, juiciness and palatability of the carrot (the incentives for individuals who do not receive health benefits from their employer to go out and buy some through the exchanges). This post is about the stick from employers, or what happens if they have more than 50 full-time-equivalent employees (hundreds of part-timers or 50 actual full time) and don't offer (adequate) health benefits. This is not about smaller companies.
At healthreform.kff.org/the-basics/employer-penalty-flowchart.aspx, the Kaiser Family Foundation supplies a helpful flowchart.
An employer who does not offer coverage, has at least 50 FTE AND "at least one employee receive[s] a premium tax credit or cost sharing subsidy in an Exchange" will get dinged. "The penalty is $2000"/year X (number of FTE - 30), or a minimum penalty of $40,000. Remember, this is 50 FTEs: if you hire one day labor person every day, or 4 groups of 12 (and a half) contractors every quarter, you may have hired more than 50 people, but you didn't have 50 FTEs and so it doesn't apply.
Let's say the employer offers coverage, but it is unusually crappy (pays less than 60% of average expected health care costs -- worse than silver). This makes the employees eligible to buy on the exchange, so if any of them do, "The penalty is $3000 annual for each full-time employee receiving a tax credit, up to a maximum of $2,000 times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums." In the case of an exactly 50 FTE company, the maximum penalty here is equal to the minimum penalty in the previous case. However, a much larger company offering crappy health insurance could be hit by a much bigger dollar amount with this fine than a smaller company offering no health insurance.
I don't know what the law says, but the flow chart at least suggests that if you none of your ACTUAL full time employees (vs. FTEs) goes out to an exchange, you're in the clear. So, crappy health care is going to persist, especially in companies that have full time workers who are paid well and get one kind of benefit, and part time workers who are paid crappy and get crappy benefits. There may be other regulations/rules/laws to deal with this, but I doubt it.
The same penalty applies if the offered coverage is unusually expensive, costing more than 9.5% of family income to pay for the employed person's coverage. Self-only -- but family income as the basis? Really? That seems wrong. I wonder if the law is really written that way.
I may update this.
I'm not sure to what degree a $40,000 fine is going to motivate a company to improve their health care coverage -- it probably won't. I also don't know if a $40,000 fine will prevent a company from dumping people from their coverage to the exchanges, if they think they can maintain their ability to hire and retain attractive employees in the face of this clearly appalling behavior. OTOH, these are not the only carrots and sticks involved; there is a substantial tax break for companies which offer health benefits to employees, and ACA adds to that (with a tax credit, no less). I think a company with more than 50 FTEs that doesn't at least consult with a company that can provide detailed, specific to the company advice on this subject is a company that deserves what it gets. Honestly, they ought to at least have someone working at the company spend part of their time for a week or two to run the numbers to figure out what makes sense for them.
My guess is that if it makes sense to offer health insurance now, it will make more sense after 2014. If it is right on the edge, it's going to tip a little more in the direction of offering health insurance. It is NOT going to tip in the direction of dumping employees.
But I guess we'll find out in a couple years, right?
ETA: I feel like in a lot of ways, this whole thing is designed to deal with the health care equivalent of Wal-Mart employees collecting food stamps, or welfare authorities that provide some assistance to children and their custodial parent or other caregiver, and then go track down the missing parent(s) and attempt to claw back some of the money they spent. All of this, in turn, tends to remind me of the Poor Laws, all of which tends to annoy me. I'd prefer a more universal system that didn't go through the employer, on the other hand, after having heard about the most recent NHS scandal, I'm not sure I'm in a hurry to make a big change.
At healthreform.kff.org/the-basics/employer-penalty-flowchart.aspx, the Kaiser Family Foundation supplies a helpful flowchart.
An employer who does not offer coverage, has at least 50 FTE AND "at least one employee receive[s] a premium tax credit or cost sharing subsidy in an Exchange" will get dinged. "The penalty is $2000"/year X (number of FTE - 30), or a minimum penalty of $40,000. Remember, this is 50 FTEs: if you hire one day labor person every day, or 4 groups of 12 (and a half) contractors every quarter, you may have hired more than 50 people, but you didn't have 50 FTEs and so it doesn't apply.
Let's say the employer offers coverage, but it is unusually crappy (pays less than 60% of average expected health care costs -- worse than silver). This makes the employees eligible to buy on the exchange, so if any of them do, "The penalty is $3000 annual for each full-time employee receiving a tax credit, up to a maximum of $2,000 times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums." In the case of an exactly 50 FTE company, the maximum penalty here is equal to the minimum penalty in the previous case. However, a much larger company offering crappy health insurance could be hit by a much bigger dollar amount with this fine than a smaller company offering no health insurance.
I don't know what the law says, but the flow chart at least suggests that if you none of your ACTUAL full time employees (vs. FTEs) goes out to an exchange, you're in the clear. So, crappy health care is going to persist, especially in companies that have full time workers who are paid well and get one kind of benefit, and part time workers who are paid crappy and get crappy benefits. There may be other regulations/rules/laws to deal with this, but I doubt it.
The same penalty applies if the offered coverage is unusually expensive, costing more than 9.5% of family income to pay for the employed person's coverage. Self-only -- but family income as the basis? Really? That seems wrong. I wonder if the law is really written that way.
I may update this.
I'm not sure to what degree a $40,000 fine is going to motivate a company to improve their health care coverage -- it probably won't. I also don't know if a $40,000 fine will prevent a company from dumping people from their coverage to the exchanges, if they think they can maintain their ability to hire and retain attractive employees in the face of this clearly appalling behavior. OTOH, these are not the only carrots and sticks involved; there is a substantial tax break for companies which offer health benefits to employees, and ACA adds to that (with a tax credit, no less). I think a company with more than 50 FTEs that doesn't at least consult with a company that can provide detailed, specific to the company advice on this subject is a company that deserves what it gets. Honestly, they ought to at least have someone working at the company spend part of their time for a week or two to run the numbers to figure out what makes sense for them.
My guess is that if it makes sense to offer health insurance now, it will make more sense after 2014. If it is right on the edge, it's going to tip a little more in the direction of offering health insurance. It is NOT going to tip in the direction of dumping employees.
But I guess we'll find out in a couple years, right?
ETA: I feel like in a lot of ways, this whole thing is designed to deal with the health care equivalent of Wal-Mart employees collecting food stamps, or welfare authorities that provide some assistance to children and their custodial parent or other caregiver, and then go track down the missing parent(s) and attempt to claw back some of the money they spent. All of this, in turn, tends to remind me of the Poor Laws, all of which tends to annoy me. I'd prefer a more universal system that didn't go through the employer, on the other hand, after having heard about the most recent NHS scandal, I'm not sure I'm in a hurry to make a big change.