Health Care Reform’s Impact on Employers: Myths, Misconceptions and Consequences
There is no employer mandate to provide health insurance coverage under the Patient Protection and Affordable Care Act (PPACA) passed in 2010, but there is a stick in the form of a $2,000-per-year/per-worker penalty hovering over the heads of a minority of California businesses with more than 50 company employees. The penalty will be assessed starting with the 31st worker and beyond.What this means is that the requirement to either provide health insurance or pay a penalty does not apply to 5.7 million out of 6 million (96 percent) of the registered businesses in California.Specifically, the four percent of California businesses that employ 50 or more people will be assessed the penalty if they do not provide coverage and if at least one of their workers receives a premium credit through Covered California, our state’s health benefits exchange. The vast majority – over 90 percent – of these large employers already provide insurance coverage for their workers, and most also provide coverage for the dependents of their workers.
In addition, and this gets to be somewhat confusing, large employers that do offer coverage but have at least one worker who receives a premium credit through Covered California will be required to pay the lesser of either $3,000 for each worker who receives this credit or $2,000 for each full-time employee when this goes into effect in 2014.
Other provisions affecting large employers that do provide health insurance coverage include: (a) the issuance of employer-funded vouchers to employees with incomes below 400 percent of the federal poverty level if their share of premium costs is between 8 and 9.8 percent and (b) a requirement to automatically enroll workers into the employer’s lowest cost premium plan if the worker does not sign up or does not opt out of coverage.
Considering today’s prices for commercial insurance premiums, why would large businesses not opt to pay the much lower $2,000-per-worker annual penalty in lieu of the much higher – three-fold and more times higher – health plan premiums available in the private marketplace? Some economists believe that large businesses offer health insurance benefits to be competitive in recruiting talent within their respective industries, and as a result are unlikely to toss in the towel, pay the penalty, and send their workers to Covered California to shop for coverage. I don’t know if I agree with that thinking, and recent trends certainly don’t back that up.
To this point, according to the Public Policy Institute of California, “[C]overage through employers declined from 62 percent in 2000 to 53 percent in 2010 … ” Accordingly, in my view, the $2,000-per- worker/per-year penalty will be viewed as a carrot to motivate many large businesses to discontinue negotiating with commercial plans on the open market.
I know what you’re thinking. Am I talking about a migration toward a single-payer system? The conspiracy theorists among us believe that this is, and always was, the objective of the authors of the PPACA. What do you think?