Affordable Care Act Pay or Play


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A quick review of the main considerations regarding the Pay or Play options with a mid-size employer under PPACA, effective 2014.

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Affordable Care Act Pay or Play

  1. 1. Affordable Care ActEmployer Pay or Play Mandate 2014
  2. 2. Pay or Play Mandate – Simply PutPPACA will require employers to make a choice:•Play by continuing to offer employees healthbenefits or•Pay a penalty tax for dropping group healthbenefits
  3. 3. Pay or Play Mandate - Recap• Beginning in 2014• Large employers: – 50 or more full time employees• Required to provide health insurance – to all full time employees( 30+ hours/week) – and their dependents
  4. 4. Penalty – Non ComplianceTwo Types 1. No Coverage Penalty 2. Unaffordable Coverage Penalty
  5. 5. 1. No Coverage Penalty• Applicable to employers who offer no coverage• $2000* “free rider” penalty” per year• for each full time employee• if even one full time employee obtains federally subsidized coverage from exchange penalty assessed• first 30 employees excluded from calculation*indexed for inflation after 2014
  6. 6. 2. Unaffordable Coverage Penalty• Coverage offered employees must be affordable and valuable• Penalty assessed when coverage fails to meet QUALITY or AFFORDABILITY standards• $3,000*/ employee receiving federal subsidy• Employees eligible for subsidy if income is 138% to 400% of federal poverty level*indexed for inflation after 2014; penalty is capped when equal to non coverage penalty
  7. 7. 2. Unaffordable Coverage Penalty• QUALITY Standard• Plan must have at least 60% actuarial value – Plan must be expected to pay at least 60% of covered medical expenses• MVP will be advising which plans meet this standard – Employer funding of HRA needs to be included in equation
  8. 8. 2. Unaffordable Coverage PenaltyAFFORDABILITY Standard•Employee’s contribution must not exceed 9.5%of employee’s W2 wages – Applies to single premium coverage
  9. 9. Play or Pay Considerations• Attracting/retaining skilled talent – Must provide market value• Exchange Affordability – Not a “slam dunk” cost saving measure – Will cost employers to make employees whole• Employee Impact – Will suffer significant reduction in overall compensation – Employees will not be able to absorb projected inefficiency of exchange based coverage
  10. 10. Play or Pay Considerations• Exchange Complexity – currently only 17 states setting up exchanges – all have different rules for rating, etc. – messy for a multiple state administration• Spousal/Dependent Coverage Impact – to be a Valid Health Plan under PPACA an employer must offer coverage to spouses and children