Alright business owners, the Patient Protection and Affordable Care Act is now the law of the land and you need to figure out how you are going to deal with the employer mandate.
First off, if you do not have 50 or more full time employees — you’re off the hook. You get back to your cafecito.
Now, for the rest of you supposed fat cats … by this year, employers with 50 plus employees will be required to offer coverage to all full time employees or opt to pay a penalty. For the purposes of the law any employee that averages over 30 hours per week is deemed full-time.
Large employers who do not offer coverage to their employees will be penalized and must pay when one full time employee receives a credit or subsidy at one of those forthcoming government Health Care Exchanges that are so upsetting so many governors. The penalty is $2,000 annually times the number of full-time employees minus 30. For example: 100 employees minus 30 employees = 70 employees times $2,000 which gets you a $140,000 penalty.
Now, let’s say that as a large employer, you do provide health insurance to your workers but the coverage you provide does not cover at least 60 percent of health care expenses for “a typical population”. Yeah, I have no idea what that means either. In that case, your employees may choose to buy coverage at an Exchange and receive a tax credit. If they do, you have to pay a penalty of $3,000 annually for each full-time employee taking the tax credit minus 30.
Similar to scenario above, but let’s say you do provide health care to your worker, but this time some of your employees have to pay more than 9.5 percent their family income for the coverage you offer as an employer. Those employees can choose to buy coverage in an Exchange and receive a premium tax credit. Again, you have to pay a penalty of $3,000 annually for each full-time employee taking the tax credit minus 30.
Penalties are increased each year by the growth in insurance premiums. Oh, and by the way, the penalties are a tax and therefore not tax deductible.
In implementing the employer mandate you may need to differentiate between your high skilled/high wage and your unskilled/low wage employees.
High skilled employees cost you more to employ. Therefore, in their case, you could choose to respond to the law in one of two ways: (i) by spending more on health benefits and reducing wages; or if the math works (ii) eliminating all coverage for employees, increasing your employees salaries so they can purchase coverage for themselves and their families at an Exchange, and you pay the penalty.
Your unskilled workers or low wageworkers will not fare as well as your higher wage ones. Unfortunately, you will not be able to afford to pay workers who cost more than they produce because now you’ll need to add health care costs to your budget.
You may need to respond to these higher costs in two ways: (i) forgo providing health benefits and force workers onto the Government Health Care Exchanges. As stated earlier, you will incur a $2,000 penalty per full-time worker, but once your do the math that penalty might be more economical than providing coverage; or (ii) replace full-time jobs with part-time positions. At this time, Congress has not implemented any penalties to employers for not providing health benefits to part-time employees, so part-time positions will cost much less to fill than full-time positions.
Luis is a government affairs lawyer and miami lobbyist serving elected officials, businesses, international clients, and trade associations. Gazitua Letelier is a Miami Lobbying Firm.