The Employer Mandate

According to a Kaiser Family Foundation report, employer-sponsored health insurance covers more than 160 million Americans today – and the Employer Mandate provision of the Patient Protection and Affordable Care Act requirements hasn’t even kicked in. Many people expect that when we get to 2014, anyone who is employed will begin to get insurance through their employer; however, the law doesn’t actually require all employers to provide health insurance. Instead, businesses with more than 50 full time workers will have to pay a penalty if they decide not to offer coverage and any of their workers gets a tax credit to buy insurance through the health insurance exchanges. Some businesses with 25 or less full time workers can even get tax credits to provide insurance benefits to their workers.

No wonder many small business owners and managers are confused! If you don’t currently provide health insurance to your employees – do you have to start? If you already provide health insurance to your employees – should you stop?

David Nather in his excellent book, The New Healthcare System explains “If your company doesn’t offer health insurance, it will have to make an economic decision about whether to start offering it or pay the fine. And, honestly, it would cost the company a lot less to pay the fine than to offer the coverage. In 2009 the average premium for employer-based health plans was $4,824 for single coverage and $13,375 for family coverage…a $2000 fine or even a $3000 fine might look pretty good by comparison.” It is no wonder that a recent survey found “…one in 10 employers in the United States say they’ll drop health coverage for employees in the next few years as the major provisions of the Patient Protection and Affordable Care Act take effect, and more indicated they may do so over time”.

Many employers I have spoken with believe that providing health insurance plans are a key part of their retention and recruitment for their employees – some, like me, even believe it is part of their social contract with their workers to insure them and their families. I understand this sentiment as I believe as an employer that our benefits program is key part of our compensation and employee satisfaction programs.

However, I also understand as that the benefits that we provide are only as good as long as we can provide jobs for those workers and their benefit security is only as secure as their employment. I have a family member with a serious pre-existing condition and when I have changed jobs in the past 10 years, I have felt that I have always made my employment decisions heavily skewed towards benefit coverage and policies around my insurance coverage.

A few years ago, I needed to take a few months off to focus on some family issues and was not able to find affordable coverage for my family or any coverage for the pre-existing condition.

I have also spoken with employers who manage businesses with low wage workers and very low margins and many are struggling with how to comply with the new laws without harming their workers or their businesses in other ways. Many of them talk about limiting their growth ambitions to make sure they stay “under 50 workers” so they don’t meet the definition of an “Applicable Large Employer”. Others struggle with offering full time jobs to workers versus keeping more people working part time so they do not have to offer benefits. There are some provisions in the law to keep employers from “gaming the system” on some of these scenarios – a topic I will cover in the future, however, there is no question that the Employer’s Mandate will cause many businesses to make difficult choices on growth, hiring, and other benefits.

Do you currently offer coverage for your employees? Do you think you will continue to do so after 2014?

Do you consider healthcare coverage the responsiblity of the individual? the company they work for? the government? I look forward to your comments.