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Healthcare Law: Federal Guidance and Thoughts about Employers Dropping Coverage

Federal government agencies continue to release guidance about how employers must comply with the Patient Protection and Affordable Care Act. At the same time, employers remain confused about compliance. Many are wondering whether it will be beneficial to drop coverage for employees once the “individual mandate” becomes effective in 2014. This article discusses the issue and explains recently issued healthcare reform guidance.

Healthcare Law: Federal Guidance and Thoughts about Employers Dropping Coverage

Thoughts on Employers Dropping Coverage and Paying the Penalty

Employers across the country are wondering what will happen after the Patient Protection and Affordable Care Act’s “individual mandate” is in effect. Some small business owners are so concerned that they are reluctant to expand until they know what consequences the law will bring. To add to the confusion, employers are hearing that it might be less expensive to pay the law’s penalty fee instead of extending health coverage to employees.

On the surface, after looking at two numbers, it’s understandable why it might look like a good idea to drop coverage:

  • Annual premiums for employer-sponsored family health coverage reached $15,745 this year, according to a recent survey from the Kaiser Family Foundation/Health Research & Educational Trust.
  • After 2014, if an employer has 50 or more workers, the fine for not offering coverage is $2,000 annually per qualified worker (although the first 30 employees do not count).

Under the law, most Americans must have healthcare insurance by 2014, or pay a penalty tax for not having it. Starting in 2014, employers with 50 or more full-time equivalent employees that do not currently offer health insurance will be charged a penalty if any of the full-time employees qualify for federal subsidies and receive them.

Businesses with less than 50 employees are exempt. To encourage them to provide coverage, they will be eligible for small business tax credits.