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Cahill: Employers face decisions with Affordable Care Act

Published: Sunday, Oct. 20, 2013 5:30 a.m. CDT

Employers are being approached by their insurance providers to consider changes and renewals to company-sponsored health insurance plans.

According to the Kaiser Family Foundation, employers currently contribute an average of $11,786 annually for employees who have family coverage and $4,885 for individual health plans. The same report also notes that the employer contribution has increased by about 80 percent in the past decade. Before committing to renewals or long-term policies, many businesses are exploring alternatives to reduce or, in some cases, eliminate their policies in light of the public exchange options.

Small and medium-sized companies, with 49 or fewer full-time equivalent employees, are not part of the mandate to offer affordable coverage, and so they are not subject to a penalty if they do not offer affordable health coverage to their employees. Companies with 50 or greater full-time employees must provide affordable coverage by 2015 or else generally pay an annual penalty of $2,000 per employee, for each employee more than 30 in the company. For example, a company with 100 full-time employees would pay $2,000 times 70 (100-30) or $140,000 if it does not provide sufficient affordable coverage. To qualify as affordable, the employee’s premium must not exceed 9.5 percent of gross income, regardless of whether the coverage is individual or family.

Here is a brief overview of some of the alternatives employers are considering to private health insurance:

• Offer employees an incentive to enroll in a public exchange option: Some employers, especially those not subject to the employer mandate, are evaluating an annual financial incentive to employees who do not use the company’s health insurance. The reasoning is that if a company pays each employee $2,000, for example, the company is only paying a fraction of what it would otherwise contribute to the employer-sponsored health plan. A concern with this option is whether the employee will end up paying more through the public exchange than is offset by the incentive, and possibly diminish the attractiveness of the company’s benefit package. Another consideration is how many employees are not currently enrolled in the company-sponsored plan, because the annual incentive is money the company currently is not offsetting through reduced premium contributions for employees not enrolled in a company plan.

• Eliminating family coverage: Another option is to offer employee-only coverage.  State subsidies are currently available for qualifying families who do not have access to affordable private health insurance. The subsidies generally make a family plan available at about the cost of an individual plan, but if an affordable family plan is available, the employee may end up paying about twice as much through an employer-sponsored plan than would be paid by qualifying for the family subsidies. By eliminating the family coverage option, employers could potentially limit their financial burden while allowing some employees a lower cost option through state subsidies.  Be aware, however, that some employees, would not qualify for state subsidies that would make the overall cost higher to those families who would not receive any employer contribution or state assistance.

• Consider the Small Business Health Options Program: Small- and medium-sized businesses may also elect an insurance program for employees through the state-administered SHOPs, which are intended to offer various insurance options, all of which meet the mandatory minimum insurance requirements for individuals. Pricing, terms, and conditions can be viewed through www.healthcare.gov.

A likely conclusion is that the most economical option will vary from company to company, based on its number of employees, their demographics, and what sort of coverage the employer currently offers, if any. However, it is important to be aware of the options before committing to a long-term private insurance policy.

• Kelly A. Cahill is an attorney with Zukowski, Rogers, Flood & McArdle in Crystal Lake. A longtime Crystal Lake resident, Cahill devotes most of her practice to employment law and to municipal and local government law. Cahill serves as a municipal attorney for the village of Algonquin. She also acts as counsel to the planning and zoning boards of the cities of McHenry and Genoa. Reach her at kcahill@zrfmlaw.com. 

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