ACA’s “pay or play” rule could cost employers big

A new study predicts the hefty fine-per-worker employers can expect if they don’t offer health insurance in 2015.

Life & Health

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For producers pushing commercial clients to adopt ACA-compliant health plans, the stakes just got higher. According to a new report from Mercer, employers that choose to opt out of the employer mandate provision can expect to pay an average $173.33 per employee per month in 2015.

The cost is even steeper for employers who offer plans the health law dubs inadequate or unaffordable. For those businesses, the cost of non-compliance is slightly higher than $260 per employee per month.

Mercer’s projections are based on data from the Internal Revenue Service, as well as the final regulations released by the US Department of Health and Human Services. The consultant superseded the IRS in calculating the estimated employer costs.

Mercer researchers also looked into several 2015 limits that will influence employer’s high-deductible health plans and health savings accounts (HSAs) under the current US tax code.

Using medical premium inflation data, Mercer calculated the minimum annual deductible under an employer-sponsored high-deductible health plan will cost $1,300 for single coverage and $2,600 for family coverage. Employee out-of-pocket costs will likely be capped at $6,450 for single coverage and $12,900 for family coverage.

As for HSAs, employees’ tax-deductible contributions will be limited to $3,350 for single coverage and $6,650 for family coverage.

According to the law’s Employer Shared Responsibility provision, employers with more than 50 full-time employees are required to either provide healthcare coverage to most of their employees or pay a penalty. The provision goes into effect on Jan. 15, 2015.

Assessing tax penalties has been a major strategy for health reform, meant to compel both employers and individuals to comply with the law’s requirements. While the 2014 individual fee failed to persuade roughly 16% of Americans to sign up for health insurance, recent polls indicate the increase in the penalty may have a measurable effect later.

According to an April Gallup poll, a $1,000 fine would persuade roughly 62% of uninsured Americans to get insured. That’s compared to about half of uninsured Americans who said the current $95 fee persuaded them to buy insurance, and 60% who said a $500 fine would compel them to seek coverage.

After the $1,000 fine, the percentage levels off, suggesting some uninsured Americans will choose to stay that way, regardless.

However, the majority of the uninsured population will likely be coming into broker offices in 2015 when the fine increases to $325, or 2% of taxable income. In 2016, the penalty jumps to $695 or 2.5% of income.

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