With time ticking, employers are now grappling with complex — and potentially punitive — rules under the Affordable Care Act, which in 2014 levies fines on employers with 50 or more workers who either don't provide health insurance, or whose employees receive federal subsidies to buy coverage because their employer's plan isn't affordable.
Employers are being urged to tackle these issues now, so they are ready on Oct. 1 when health insurers start enrolling employees in health plans taking effect Jan. 1, when most provisions of the ACA kick in.
John Sarno, president of the Employers Association of New Jersey, has been conducting packed compliance seminars for his 1,200 members. The first hurdle for employers: figuring out if they are "large" employers with 50 or more full-time workers. Seasonal workers and part-timers get factored into the calculation, and can push employers over the 50 mark; a business with related operations, like a string of fast-food franchises, has to count the employees working at various locations.
Large employers that decide not to provide health insurance will pay a penalty of $2,000 per full-time worker, minus the first 30 workers. For large employers that do offer health insurance, the ACA requires that the plan be "affordable" — the employee's share of the premium can't be more than 9.5 percent of the worker's annual compensation. If the plan flunks the affordability test, and the worker gets a federal subsidy to buy coverage, the employer is fined $3,000 for that employee.
"This is the real nuts and bolts stuff," Sarno said, and so far, "Most of the employers I'm talking with, if not all, are going to meet the requirements without having to pay a penalty."
Pat Carroll is a senior director of benefits and corporate development at Solix Corp., an EANJ member that employs nearly 400 at its Parsippany headquarters. The company does eligibility analysis for government and commercial subsidy programs. She said Solix's health plans should meet the ACA's affordability test, "unless there is a severe rate increase" by health insurers.
The New Jersey Hospital Association created a spreadsheet tool, called RIPE — short for reform insurance penalty estimator — that its members are using to determine whether their health plans are affordable. About nine months ago, the NJHA began selling the product for $249 to nonmembers; so far, about 18 employers around the country have purchased it. Executives plug their employee compensation and health insurance premiums into the spreadsheet, where the data can be manipulated, said Belinda Cooper, vice president of human resources at the NJHA. "If I see that I'm going to have to pay a penalty for five of my employees, because I'm charging them too much for insurance, then I can say, 'What if I change their pay?' Or maybe I can revisit the kinds of benefits I am offering to them, and reduce the cost to the employer and the employee."
"Employers are thrilled to use this," said Terry Wagner, an NJHA human resources project specialist who led the team that developed RIPE. "They can see how they might need to change the way they are offering insurance — or perhaps they don't have to make any changes at all."
The issue facing companies with 50 or more employees is whether to "pay or play" — whether to provide health insurance, or pay the penalties. The payroll and employee benefits consultant Checkpoint HR in Edison has created "a very strong 'pay or play' modeling tool, so we can sit down with our clients and show them exactly what the effect is going to be," said Patrick Carragher, vice president of benefits. But that doesn't mean employers will drop health insurance: "The need to offer a strong employee benefit package, including medical coverage, has not changed from a year or two ago. They still need it to retain and attract good solid employees, especially in the New York metropolitan area."
But companies face penalties if an employee can't afford the company's health plan, then gets a subsidized policy on the insurance exchange the federal government is creating in New Jersey. Insurers are expected to start selling government-subsidized plans via the exchange beginning Oct. 1. That will mean trouble for "a small percentage of our clients," Carragher said, "but most are going to be OK."
Checkpoint CEO Tim Padva said health insurance is an employee benefit companies provide voluntarily, and most employers want to continue offering benefits.
Checkpoint enables clients to give their employees a lump sum, or defined benefit, which they can allocate among medical and dental benefits, life insurance or disability coverage.
"Employees don't want their employer to make decisions about what type of health care they should buy," Padva said. "What they really want is the funding from the employer."
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