Are You Ready for ‘Play or Pay’? What Small Businesses Need to Know
The Affordable Care Act’s (ACA) Employer Shared Responsibility requirements (also known as the Employer Mandate or “Play or Pay”) went into effect in January 2015. In broad terms, it means that companies with 50 or more full-time equivalent employees must offer affordable health insurance that meets certain minimum standards to those who work at least 30 hours a week (or 130 hours per month), or face tax penalties.
Like everything else associated with the ACA, the mandate is complicated. Here’s a brief review of how it could affect your business and some things to consider when making decisions about your employees’ health benefits.
One of two types of penalties may be triggered when a full-time employee receives a premium tax credit on the Marketplace:
No offer of coverage or does not cover enough (70 percent in 2015, 95 percent in 2016 and beyond):
- 2015: $2,000 x (# of full-time employees minus 80) for employer with 100 or more full-time equivalents
- 2016: $2,000 x (# of full-time employees minus 30)
Coverage is unaffordable, does not meet minimum value or was not offered to specific full-time employee:
- The lesser of:
- the penalty for no offer of coverage, or
- $3,000 x (# of full-time employees receiving premium tax credit)
The ACA considers coverage “affordable” if the employee’s required premium contribution for self-only coverage does not exceed 9.5 percent of household income for the taxable year.
There are other options that can be considered when making health insurance decisions. For example, workplace wellness programs, which give employees financial incentives for meeting health goals like lowering cholesterol, can help reduce overall health care costs.
At Blue Cross Blue Shield of Michigan, we have found that many large employers may be better off providing a minimum value (bronze) plan to their employees versus paying penalties. Companies with 50 to 99 full-time equivalent employees may delay the employer mandate until the first day of their 2016 plan year if they meet certain requirements. Those with 50 or fewer full-time employees may be eligible for the Small Business Health Options Program (SHOP) Marketplace beginning in January 2015.
Ready to pick your plans? A good place for any employer to start is your local insurance agent. BCBSM can help you find an agent here. For additional information on mid-to-small business insurance plans, visit bcbsm.com.
Photo credit: RikkIsRefuge Other