March 29, 2016 8:00 AM
As the Affordable Care Act heads into its third full year of existence (some provisions started before 2014), there doesn’t seem to be any more clarity for business owners and what they should do. If you have 50 or more employees, do you offer it? Do you succumb to the ever increasing costs and drop coverage and pay the penalty? If you’re under 50 employees, should you drop it and get out while you can? Are there any more changes coming down the road that you need to know about? Well, a recent article in New England Journal of Medicine may help shed a little light on things for you.
A New Twist in ACA Financial Consideration
Like many people, I wondered about the financial advantages of paying high health insurance premiums when you could pay a fine of $2K. Aside from the possibility of not attracting or retaining quality employees due to a lack of benefits, that would make all the financial sense in the world, right? Yet when reading through the New England Journal of Medicine article, a financial consideration I hadn’t thought of was brought up.
“The ‘simple math’ that a $2,000 fine is less than the $10,000 average per-employee cost of coverage is complicated by the tax deductibility of employers’ health care contributions. The increase in non–tax-deductible salaries that would be needed to keep projected health care costs from damaging employee recruitment and retention efforts exceeds the savings an employer could expect from dropping health care coverage.”
Now the cynics among us are also thinking that if the history of inefficient government bureaucracies continues, then the penalties are sure to go up in the future. Those factors, and the popularity of CDHPs (Consumer-Directed High-Deductible Plans) helping control health care cost increases, have kept employers from dropping coverages en masse.
ACA Guidance from the Experts
If you’re under 50 employees, my suggestion is that you don’t get too comfortable being exempt. The majority of businesses in this country are small businesses. As the cost of the government-run exchanges continues to go up (more than half of the federally-run exchanges have shut down for insolvency), the pressure will increase to lower the threshold for mandating employer sponsored coverage.
If you’re looking for guidance or help, or need to think about offering a comprehensive benefits package of your own, you can reach out to a Professional Employer Organization like GMS for advice on what the best plan of action would be for your business. Contact GMS today to talk to one of our experts about ACA guidance.