Employers continue struggling to anticipate the evolving regulations of the Patient Protection and Affordable Care Act (PPACA). Staying in compliance with the new law, which is being implemented with staggered deadlines even as regulations are still being written, presents huge challenges and some tough decisions.
The PPACA includes a host of tighter rules and new requirements and restrictions, and penalties for non-compliance are likely to be significant. But many of these provisions are still a work in progress, and with many unknowns still plaguing full implementation of the law, employers should stay alert as the Department of Health Services (HHS) develops regulations. While the exact impact of many changes is yet to be determined, you can be certain that the new law is going to hit home for you if you offer healthcare coverage to your employees and their dependents.
Probably the most significant decision you confront is whether to “pay” or “play.” In other words, should you discontinue sponsorship and “pay” a penalty tax, or choose to “play” by continuing to offer health benefits? Most employers will probably wait to make this decision based on how successful the new state healthcare exchanges are in creating a viable market for employees to purchase coverage.
Beginning January 1, 2014, employers who had an average of 50 full-time employees in the previous year must offer “minimum essential coverage” or pay a fine of $2,000 per employee. If you offer coverage that fails to meet a multi-step definition of “minimum essential coverage,” the fine gets bumped to $3,000 per employee.
HHS has yet to fully define “minimum essential coverage,” but some organizations could weigh the cost of providing healthcare coverage against the $2,000 per-employee penalty and decide it’s cheaper to eliminate coverage altogether, despite other considerations such as taxes and employee recruitment and retention.
Keep in mind that for employees, the individual penalty for not complying with the new mandate to purchase healthcare insurance is modest, so young, healthy workers might choose to pay the penalty instead of paying the premium contributions for their employer's plan or buying a plan from a healthcare exchange. If that happens, it’ll be difficult to keep your group together. If you’re thinking of “playing” instead of “paying,” that would be something to consider if you were only left with the older, more expensive employees in your plan.
If you intend to pay rather than play, you could see a lot of pressure from your younger employees to continue sponsoring a group plan for them. And employees who lose their health coverage could demand higher wages to compensate.
Right now there’s still some wiggle room in the law. While employers can safely maintain the status quo in many areas while regulations are still being finalized, they also must be diligent about correctly handling notices and fulfilling regulatory requirements.
For now, PPACA is the law of the land, so your best course of action is to arm yourself with knowledge and stay current on the changes in the law. Watch for updates from the Departments of Treasury, Labor, and Health and Human Services (HHS). By staying informed and carefully weighing your options, you can navigate the maze and make the smartest choices for your organization.