I have been fortunate thus far in employment. All three of my post-college jobs have provided me with healthcare insurance, and two of the three employers have even picked up the entire tab on the premium for me (family members were extra). Other than having to take on disaster healthcare plans to bide my time for the 30-90 day period that it took to get onto my employer plan, I have been covered without much of a headache. Now that I am self-employed, I am still lucky in that my husband’s employer offers healthcare plans for both the employee and his or her family.
But there are many employees that are not so lucky. Only 59.5% of nonelderly employees have access to an employer sponsored insurance plan. This means that an incredible 40.5% of people do not currently have access to an employer sponsored insurance plan (as of 2011). The Patient Protection and Affordable Care Act of 2010 attempts to close this gap.
What is the Employer Mandate for Health Insurance?
The Patient Protection and Affordable Care Act of 2010 (aka Obamacare) does not technically require employers to offer a health care plan to their employees. But it does twist their arm; beginning soon, if an employer with 50 full time employees or more chooses to not offer a group health insurance plan to their employees, then they are going to have to pay federal penalties in the form of a tax.
There are also requirements for this group health insurance plan. First of all, the insurance plan premiums must be no more than 9.5% of the employee’s income. Secondly, the plan must meet certain core requirements called the minimum essential coverage. Included in this requirement is offering one of the following types of health insurance plans: either a government-sponsored coverage, such as Medicare or Medicaid; an “eligible employer-sponsored plan”; a plan “offered in the individual market within a State”; a “grandfathered health plan”; or anything else that the Secretary of Health and Human Services deems appropriate. An eligible employer-sponsored plan must provide minimum value (the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs).
So what happens to the employee if a large employer does not meet the mandate and instead decides to pay the penalties? In a nutshell, if the plan is more than 9.5% of an employee’s income, the plan pays less than 60% of costs, and the employee is not eligible for Medicaid or other programs, then the employee could be eligible for subsidies in the form of the New Health Insurance Premium Tax Credit on the healthcare exchange depending upon their income.
Employer Health Insurance Penalties
There are two potential health insurance penalties that large employers can pay under this Act (both of which are non-deductible). The employer health insurance penalties are referred to as a strong penalty, and a weak penalty, and an employer would either pay one or the other. The strong penalty occurs when a large employer offers no group healthcare insurance plan at all. When the employer fails to offer a plan as well as at least one of their full-time employee enrolls in an exchange, the employer has to pay a fine of $2,000 times the total number of full-time-equivalent employees at the firm, minus 30.
The weak penalty occurs when the employer has a group healthcare insurance plan, but it does not offer the minimum essential coverage discussed above. In this case, if at least one worker enrolls on an exchange instead, the fine is $3,000 times the number of workers who enroll on the exchanges.
The health insurance penalties for employers are separate from the individual penalties for going without health insurance in 2014.
The Congressional Budget Office expects the penalties to generate $52 billion toward the overall cost of health reform by 2019.
Mandate for Employer Sponsored Plans Pushed to 2015
The employer health insurance mandate was supposed to go into effect on January 1, 2014. Just recently, the Employer-Sponsored plan mandate has been postponed until 2015. The delay in the mandate will also delay the health insurance penalties for employers.
As a recent CNN article points out, the employer mandate has a few potential flawed side effects. What if employers begin hiring more part-time employees in order to keep penalty costs lower? What if companies begin hiring well-off workers as opposed to poor workers so that they won’t qualify for subsidies on the healthcare exchange and the company will not be charged a penalty at all? And of course one of the largest questions (also rhetoric at this point) is whether or not this new healthcare law will bring down the costs of health insurance in the United States. Unfortunately, it will be years from now before we can accurately answer these questions.