Additional Thoughts on the Government Subsidizing Employers’ Healthcare Expenses in 2014

This blog post discusses some additional factors employers should consider before deciding whether to implement the strategy discussed in the Government Offering to Subsidize Employers’ Healthcare Expenses in 2014 publication.
  • The employer may see a rise in the number of participants in 2014 if the employer continues to offer coverage.  With only a few exceptions, individuals who are not covered by minimum essential coverage will have to pay a tax beginning in 2014 as a result of the individual mandate.  While the individual mandate is slowly being phased in, it may nevertheless cause more participants to enroll in an employer’s health plan to avoid the additional tax.
  • Employers need to keep in mind that the only aspects of the Affordable Care Act that were delayed were the information reporting requirements for insurance providers and the Play or Pay Mandate.  Neither of these provisions were the driving force behind the expected increase in the cost of health insurance in 2014.  In other words, an employer should still expect their plan premiums to be higher in 2014 compared to 2013.
  • Employers that terminate their health plan for 2014 may make health coverage available to a greater percentage of their workforce.  If the employer is paying 70 percent of the premiums under the plan it is currently offering, the employee will be responsible for the remaining 30 percent.  This means the employee is likely paying more than $1,000 in premiums annually. However, as shown in The Math Behind the Government Subsidizing Employees Insurance in 2014, if the employer terminates their plan in 2014 the employees will likely be able to receive a comparable bronze plan at no expense to the employer or the employees.  By terminating the employer plan for 2014 more employees would have access to health insurance with no penalty being imposed on the employer.
  • The number of employers that can utilize the strategy discussed in the Government Offering to Subsidize Employers’ Healthcare Expenses in 2014 publication may be much greater than I originally anticipated.  In my original publication I limited the strategy to employers with insured health plans.  However, after further thought a self-insured plan could utilize the strategy if the workforce demographics are right.  Suppose an employer has 2,000 employees with 1,500 of the employees working for an hourly wage and making significantly less than 400 percent of the federal poverty line.  If the employer sponsored a self-insured plan to cover the entire workforce, the employer could terminate the plan and place the 1,500 employees on the State’s Exchange where the employees would be eligible for the premium tax credit program.  The employer could then form a new plan to cover the 500 employees that make more than 400 percent of the federal poverty line.