The Obamacare mandate will be enforced on large employers in 2015 and small employers in 2016. Large companies who self-insure can have a plan that does not cover hospitalization, mental health care, or emergency room visits. Small companies have to cover all these things. Here are some strategies that employers are using:
Stay Small. – An employer with less than 49 employees is exempt from the mandate. However, if someone owns three separate businesses, the IRS will treat them as one business, not three. This discourages new business development. Also, two 15-hour a week employees will be counted as one full time equivalent.
Use Part-Time Labor. – Part time jobs are multiplying while full time jobs are holding steady. Making sure employees stay under 30 hours will require tight time scheduling.
Use Non-Employee Labor. – Independent contractors are not employees. Even if they work at the employer’s workplace, contractors are not counted as employees if they do not have regular hours. The temp business is booming in anticipation of the mandate.
Charge Employees the Maximum Allowable Premium. – A health plan is called “affordable” if the premium does not exceed 9.5% of an employee’s wages. Under Obamacare, the employer doesn’t have to cover dependents. The employee’s contribution will be made with after-tax dollars, whereas the employer’s share will be paid with before-tax dollars. After an employer has offered insurance, the employee and his family are not able to get a subsidy in the insurance exchange. What is in the best interest of the employer is harmful to the employee.
Offer a Minimum Essential Coverage (MEC) Plan. – As long as an employer offers insurance with minimum essential coverage, they can escape the fine. Ralph Weber of MediBid says that this can be a skimpy plan which includes doctor visits and drugs, but not inpatient surgery or ER visits.
Offer a MEC Plan with an Opportunity to Upgrade to Obamacare Compatible Insurance. – Employers can offer an upgrade to a plan that meets “affordability” and “minimum actuarial value” test. If the employee turns down the offer, the employer is no longer at risk for the $3000 fine.
Take Advantage of Imperfections in the Minimum Value Calculator. – Benefits for self-insured companies can differ from benefits in a standard plan, but the employer has to cover at least 60% of expected costs in a standard plan. Hospitalization, mental health care, imaging, ER visits, and specialist services do not have to be included to meet the government’s test.
Pay the Fine. – Employers can drop coverage and pay a fine of $2000 per employee. This is a high price, but less than the cost of insurance. With this option, the employees can apply for subsidized insurance in the exchange. This is a win-win choice – the employer saves money and the employee gets a subsidy worth much more.
Goodman, John C. “What Can Employers Do To Reduce The Cost Of Obamacare?” Healthcare, Fiscal, and Tax. Forbes, 16 Sep 2014. Web. 5 Oct 2014.