Survey data from a 2015 study conducted by the International Foundation of Employee Benefit Plans reveals that thirty-three percent of employers expect the largest cost increase from expenses associated with the Affordable Care Act will be in 2016.
EMPLOYER SHARED RESPONSIBILITY
The Employer Shared Responsibility mandate, also known as “Play-or-Pay” is poised to encompass a broader group of employers in 2016. As its name implies, Play-or-Pay will result in hefty expenses if not followed correctly. While the Affordable Care Act does not require employers to offer health benefits to employees, in 2016 there will be a penalty for not making coverage available to enough full-time employees or if the coverage is not affordable and a full time employee purchased subsidized marketplace coverage.
What are the penalties?
There are two separate penalty calculations for separate events:
1) Penalty for not offering coverage: The penalty for each month the employer failed to offer coverage equals $2,160 divided by 12, multiplied by the number of full-time employees (minus up to 80).
This penalty applies when coverage is not made available to at least ninety-five percent of full-time workers, AND at least one of those employees receives a premium tax credit or subsidy in the Federal or State Marketplace.
2) Penalty for Non-Affordable Coverage: The penalty for each month equals $3,240 divided by 12 for each full-time employee receiving premium tax credit that month, multiplied by the number of full time employees (minus up to 30). This penalty applies when coverage is not at least sixty percent of the minimum value for the standard population; OR when employees had to pay more than 9.56% of W2 wages earned for coverage, and one or more full-time employee received a premium tax credit for paying for Marketplace health coverage.
See a helpful visualization from the Henry J. Kaiser Foundation mapping this concept.
Are you an employer with fewer than fifty employees wondering where you fit in? Employers who average less than fifty full-time employees during their prior year are not ALEs and therefore not subject to the ACA Play or Pay mandate.
The bottom line
Even though anticipated 2016 ACA-related expenses may increase for many employers, ninety-six percent stated they will continue to offer healthcare coverage five years from now, according to the survey. These benefits are seen as a necessity for retaining existing employees and acquiring high-quality new talent to organizations.
Stay tuned for Part 3 of our series 2016 Snapshot: Biggest Benefit Changes Impacting Employers. Read Part 1 here.