Employers – Pay or Play, Affordable Health Care Act

See www.moranlong.com for additional information on health care and tax law integration.

What are employers likely to do, after the recent Department of Health and Human Services moratorium on enactment to Year 2015? Will they pay the penalty ($2,000 per employee not covered) and not have a tax deduction, or will they play and pay 2 to 3 times the penalty in health coverage for their employees?

Prior to the recent moratorium on enforcement, the benefits consultant Mercer Inc. conducted a survey and found that six percent of firms offering health coverage planned to cease coverage. In July, 2012, the Congressional Budget Office (“CBO”) estimated 2.5 percent of workers who are counting on their employer to offer coverage might lose the benefit by the end of the next decade. A Gallup poll found that 44.6 percent of Americans get their health insurance from an employer in 2011, a rate that has declined for more than a decade. The CBO projects, on balance, the law’s reforms will expand coverage to about half of the 58 million people who don’t have insurance today.

Currently, many employers are wise to hesitate at dropping health coverage as health coverage is a recruiting advantage for prospective employees, and a retention factor in the minds of current employees. 

Beginning in 2014, there is a tax of $63 per person covered (including all dependents under the employer plan, not just employees).  This tax is estimated to raise $25 billion fund to to cover people with high medical bills. The University of Notre Dame will pay more than $500,000 for the 5,000 employees and 7,000 dependents under its plan.   This new cost will be factored into tuition costs for future students.