CLARKSBURG — The Affordable Care Act’s controversial employer mandate is set to take effect in 2015 for companies with 100 or more full-time equivalent employees.
But exactly how this will impact employers — and how employers will react — won’t be clear until the mandate has been in place for a while, experts said.
Starting in January, companies with 100 or more full-time equivalent employees will have to provide health insurance for at least 70 percent of their full-time workers (30 hours or more). Companies that fail to meet this requirement in 2015 will incur an annual penalty of $2,000 per full-time equivalent employee, not including the first 80.
An employer also can incur a penalty if the health insurance provided does not meet minimum coverage requirements or if it costs an employee more than 9.5 percent of his/her total income for a single-person plan.
If an employer fails to meet the affordability requirement, then it will incur a roughly $3,000 annual penalty for each of its employees who receive a federal tax subsidy through the individual marketplace.
The mandate will expand in 2016 to include companies with 50 or more full-time equivalent employees, and the penalty for not providing coverage will be calculated based on the number of full-time equivalent employees minus the first 30.
Even after 2016, employers with fewer than 50 full-time equivalent employees will not be affected by the mandate. Some employers with 25 or fewer employees may qualify for a health insurance tax credit.
Gary Claxton is vice president of the Kaiser Family Foundation and works on the group’s annual Employer Health Benefits Survey.
According to Claxton, the impact of the ACA’s employer mandate — at least in 2015 — is likely to be modest for most firms.
“Most employers of that size already offer coverage that would meet the standards, so the changes are small,” Claxton said. “The employers who would potentially be affected are the ones who did not offer insurance to a sizable chunk of their employees and would be required to offer it now.”
Claxton pointed to businesses that rely on low-wage workers, such as chain restaurants.
The potential is there for the mandate to influence how many hours employers give to each worker to avoid penalties, Claxton said, though he emphasized that other factors play a part. It’s difficult to know until the mandate actually takes effect, he said.
“There’s a lot of training and turnover issues that may or may not make it worthwhile, but there’s certainly a potential that could occur,” Claxton said. “You’ll find examples, and certainly some employers will do this.
“How much of it is true and how much of it is potential that is not going to be realized, we don’t know yet.”
As for whether more employers will be willing to pay the penalty and allow their employees to fend for themselves in the marketplace, most experts seem to agree there’s little evidence to suggest such a trend will take hold on a large scale.
“If they wanted to stop offering coverage before, they could have done that before,” Claxton said.
Michael Doonan is an associate professor at Brandeis University in Boston. He’s also the executive director of the Massachusetts Health Policy Forum.
Doonan pointed to what happened in Massachusetts when a health care law similar to the ACA was implemented there.
“People thought that employers would drop coverage and just let their employees go into the exchange, and that didn’t happen. In fact, what we saw was an uptick,” Doonan said.
Most companies offer health insurance because of market incentives, not because of a mandate, Doonan said.
“Why are companies paying for health insurance?” Doonan said. “Because they want to keep and retain good employees.”
Joseph Deacon is an independent agent and co-owner of Deacon & Deacon Insurance Agency in Charleston and is also immediate past president of the West Virginia Association of Health Underwriters.
Deacon said most of the larger firms he works with — generally the ones affected by the mandate in 2015 — do not intend to drop their health insurance plans.
“From an economic standpoint, sure it makes sense. The penalty in almost every case I have seen is less than what the employer premium is,” Deacon said. “But then you get into the psychological issues. Your employees think, ‘Gosh, my employer doesn’t want to offer me anything. They want to push me onto the marketplace.’
“At the end of the day, the larger employers that I deal with are not intending to get rid of their plans.”
But some of the smaller employers, those facing rising health care costs and those whose employees would qualify for federal subsidies may do the math and opt to drop their plans, Deacon said.
As for whether offering employer-sponsored health insurance is becoming more onerous, Deacon said employers can often pay a lot to make those health plans affordable under the ACA’s guidelines.
But rising health insurance premiums were an issue well before the ACA roll-out, Deacon said. The United States has faced a challenge in managing its health care costs for years, and this has impacted the health insurance industry, with premiums seeing “large increases for years and years,” he said.
“Unless there is a shift to individuals taking better care of themselves and trying to make themselves healthier, health care will be consumed,” Deacon said. “Health insurance is expensive because health care is expensive and because of the consistently increasing demand for health care services.”
Doonan noted that there’s a tendency to blame the ACA for any unwanted changes in health insurance premiums or health care costs that have occurred since its implementation.
“Anything negative that’s happening in the health care system is being attributed to Obamacare,” Doonan said.
According to Kaiser’s 2013 Employer Health Benefits Survey, employers saw their average contribution for a worker’s family health insurance plan rise from $6,657 in 2003 to $11,786 in 2013. Worker contributions saw a similar percentage increase during the same time frame, according to the survey.
Staff writer Jeremiah Shelor can be reached at (304) 626-1409 or by email at jshelor@theet.com
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