A quick review of the main considerations regarding the Pay or Play options with a mid-size employer under PPACA, effective 2014.

1. Affordable Care Act
Employer Pay or Play Mandate
2014

2. Pay or Play Mandate – Simply Put
PPACA will require employers to make a choice:
•Play by continuing to offer employees health
benefits
or
•Pay a penalty tax for dropping group health
benefits

3. Pay or Play Mandate - Recap
• Beginning in 2014
• Large employers:
– 50 or more full time employees
• Required to provide health insurance
– to all full time employees( 30+ hours/week)
– and their dependents

4. Penalty – Non Compliance
Two Types
1. No Coverage Penalty
2. Unaffordable Coverage Penalty

5. 1. No Coverage Penalty
• Applicable to employers who offer no coverage
• $2000* “free rider” penalty” per year
• for each full time employee
• if even one full time employee obtains federally
subsidized coverage from exchange penalty
assessed
• first 30 employees excluded from calculation
*indexed for inflation after 2014

6. 2. Unaffordable Coverage Penalty
• Coverage offered employees must be affordable
and valuable
• Penalty assessed when coverage fails to meet
QUALITY or AFFORDABILITY standards
• $3,000*/ employee receiving federal subsidy
• Employees eligible for subsidy if income is 138% to
400% of federal poverty level
*indexed for inflation after 2014; penalty is capped
when equal to non coverage penalty

7. 2. Unaffordable Coverage Penalty
• QUALITY Standard
• Plan must have at least 60% actuarial value
– Plan must be expected to pay at least 60% of
covered medical expenses
• MVP will be advising which plans meet this
standard
– Employer funding of HRA needs to be included in
equation

8. 2. Unaffordable Coverage Penalty
AFFORDABILITY Standard
•Employee’s contribution must not exceed 9.5%
of employee’s W2 wages
– Applies to single premium coverage

9. Play or Pay Considerations
• Attracting/retaining skilled talent
– Must provide market value
• Exchange Affordability
– Not a “slam dunk” cost saving measure
– Will cost employers to make employees whole
• Employee Impact
– Will suffer significant reduction in overall compensation
– Employees will not be able to absorb projected
inefficiency of exchange based coverage

10. Play or Pay Considerations
• Exchange Complexity
– currently only 17 states setting up exchanges
– all have different rules for rating, etc.
– messy for a multiple state administration
• Spousal/Dependent Coverage Impact
– to be a Valid Health Plan under PPACA an employer
must offer coverage to spouses and children