Employee Benefits Blog

With healthcare costs continuing to rise, small employers that aren't obligated to offer health/medical insurance per the Affordable Care Act’s (ACA) “employer mandate” have been dropping group coverage. This is a trend that started in 2009 during the recent recession. Some larger employers have also considered doing the same (though, they must pay steep ACA penalties if they do). At first glance, it might seem like this would bolster the health and stability of the individual insurance market. Despite the numbers of insured rising, however, increased costs and fewer options have put a serious squeeze on what was once a very healthy marketplace.

Group Health Insurance and Individual Health Insurance by the Numbers

Occasionally, a news piece predicts major shifts in the health insurance landscape, including dire predictions about employers dropping group health plans due to their high costs. However, it’s important to look closely at these numbers, as well as the size of the companies cited in the statistics.

Determined to pass health care legislation before the July 4th break, the Senate on Thursday night released a draft ACA replacement bill called the Better Care Reconciliation Act (BCRA). As of this morning, at least five Republican Senators have said they won’t vote for the bill. GOP Senate leaders can only afford to lose two members of their 52-senator caucus in order for the bill to pass. (The loss of two would require Vice President Pence to cast the tie breaking vote, assuming not a single Democrat supports the bill.)

While passage as the bill stands now seems dubious, Republicans and the White House see this as one of the last chances they have to pass healthcare legislation before they can move on to tax reform, so amendments are likely to win back some of these Senators. That process, however, could push the vote to after the July 4 break. Still, Majority Leader Mitch McConnell is a seasoned politician, and many pundits doubt he’d call for a vote before the recess if he didn’t have a few aces up his sleeve.

Let's look at several elements of the bill which are particularly pertinent to employers:

President Trump promised to repeal ObamaCare on “day one”. While it’s going to take a little longer than he had planned, it does look inevitable that an overhaul to the Affordable Care Act (ACA) will eventually pass both houses of Congress, even despite recent legislative setbacks.

One of the least popular provisions of the law, at least for employers, is the “employer mandate”, which requires certain employers with 50 or more “full-time equivalent” employees (FTEs) to provide an affordable healthcare plan. With the proposed law as it stands today, now in jeopardy, a pressing question is now looming over employers: if the employer mandate really is repealed, should they drop their health coverage?

The issue certainly isn’t cut and dry, with some believing that no matter what happens in Washington, employer-sponsored healthcare is dying and others predicting it will never really go away. Assuming the ACA’s employer mandate is repealed, every company will have an important decision to make, weighing the benefits and pitfalls of dropping coverage.

Repealing the Employer Mandate

Republican lawmakers have spoken on countless occasions about wanting to repeal the employer mandate. The Trump administration even ran on a platform of getting rid of it. In theory, this doesn’t seem like a big deal, but in practice, it’s more difficult than it seems. The employer mandate, after all, is the primary mechanism by which healthier people are brought into the overall risk pool, which is the only way a healthy insurance market works (healthy people subsidize the unhealthy, essentially). Without it, most experts predict that insurers would pull out of the healthcare exchanges and the entire program will collapse.

When starting a business, most entrepreneurs want to attract employees by offering them a robust benefits package. Then, reality sets in, and they realize that this will have to wait until they establish positive cash flow. Well regardless of if an employer is just starting out or if they’re already well established, employers need to realize that there are certain required employee benefits they MUST offer in order to maintain compliance with the law; failure to do so can trigger large penalties. Here are required employee benefits employers cannot skip — and some that are only applicable as a business grows.

Required Employee Benefits For Employers of Any Size

1. Social Security and Medicare Benefits

Every employer, regardless of size, is subject to the required employee benefit of matching their employees’ social security and Medicare contributions. The current rate for social security is 6.2 percent of the employee’s wage from each party, equalling 12.4 percent in total, up to the first $127,200 in earnings. This amount is also known as the “wage base limit.”

The ACA Cadillac Tax 101: What You Need To Know

As one of the most controversial features of the Affordable Care Act, the so-called Cadillac Tax is currently scheduled for implementation beginning in 2018. This deadline looms large in the minds of many business owners, as the Cadillac Tax, as the law is written, will have a significant impact on businesses of all sizes.

The 40 percent tax targets plans that provide workers with the most generous level of health benefits. These plans are typically employer-paid plans, with low deductibles and little cost-sharing for employees. The excise tax will be applied in 2018 to coverage for health plans exceeding $10,200 for individual coverage and $27,500 for self and spouse or self and family coverage. Any dollar amount beyond these specified caps will be considered excess health spending, and will be penalized at 40 percent, payable by the insurer (e.g. employer).