Health Law Rollout: Smallest Employers Could Feel Greatest Impact

May 2, 2013, 3:39 p.m. ET

The health law carries major changes for many employers.

Starting in 2014, those with at least 50 workers will owe penalties if they don’t cover full-time employees. To completely avoid the risk of penalties, their health plans will generally have to meet certain minimum requirements, including covering a list of required benefits.

The biggest companies, providing relatively generous health benefits, will generally feel the least effect. That includes many with largely white-collar or unionized workforces. Still, even big firms will face some fees under the law, including one that amounts to $63 per covered worker in 2014.

But some smaller firms, and those in industries that have lots of lower-income and part-time workers, could see a major impact. Some offer no health benefits today, or limited coverage that won’t meet the law’s standards. Upgrading to richer plans could raise costs substantially; failing to do so could trigger the penalties, which can amount to $2,000 or $3,000 for each uncovered worker, depending on the circumstances, with the first 30 employees exempted from the count. Some companies are trying to find a middle ground with limited, inexpensive plans that could spare them having to pay the bigger penalty, amounting to $2,000 per worker, but still could leave them at risk of paying $3,000 for each employee who is able to get a federally-subsidized plan through one of the law’s new online marketplaces.

Some companies that already provide health benefits may see their spending go up as workers who had opted out of such plans in the past decide to take them. That could come partly because of the law’s mandate that individuals have coverage or face a penalty of their own, separate from the one assessed against employers.

The law also requires larger employers to automatically enroll eligible employees in health benefits, a shift that promises to further boost enrollment, though that provision isn’t currently slated to go into effect in 2014. It’s not yet clear precisely when regulations putting it into practice will emerge. The law also says that employees who work at least 30 hours per week should be covered, a threshold that could sweep in many workers now not offered health benefits.

Companies seeking to trim the impact on their expenses are looking at workforce changes including efforts to keep certain workers’ time below the 30-hour threshold. Some are also considering tweaks to their health-plan designs that would lower costs, such as asking employees to pay more out of their pockets through deductibles and other charges, if they can do this and still meet the law’s coverage-design requirements.

Another approach that’s gaining traction among some companies is giving employees a set sum of money and a choice of plans and letting them pay more if they opt for pricey coverage.

The most extreme option, of course, would be to drop coverage altogether and pay the law’s penalties. This is expected to be rare among larger companies, but some smaller firms are considering it.

Beyond the penalties, firms have to factor in the continuing tax advantages of employer-provided coverage, one reason it has remained a common benefit for so long. Generally, the expense of covering a worker’s health insurance is not counted as income for the person for tax purposes.

—Anna Wilde Mathews




On July 19th, 2013, posted in: NEWS by

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