By US Daily Review Staff.
If the Affordable Care Act (also known as “Obamacare), or ACA, passes U.S. Supreme Court muster, and even if just the Individual Mandate is thrown out, it will present businesses with a host of challenges in complying with Title I’s “Pay or Play” provisions, warned Neil Harkin Ekblom, a Manhattan-based shareholder at national law firm LeClairRyan and a member of its Healthcare Industry Team.
To begin with, businesses with more than 50 full-time equivalent employees must offer specified minimum levels of health insurance coverage to their workers. Those who don’t could face a penalty of $3,000 for each employee who receives an exchange credit if universal employer-sponsored insurance (ESI) is unaffordable, or a company-wide penalty of $2,000 per-employee in cases where there is no universal ESI and even one employee gets an exchange credit.
Companies should consider doing a Pay or Play cost-benefit analysis before they take any action, said Ekblom, who was a featured speaker at Understanding the Impact of Health Care Reform on Employers, a conference sponsored by Lorman Education Services on June 20 in Manhattan.
Even as the U.S. Supreme Court weighs the constitutionality of the ACA, businesses should still consider their options, he advised.
A Recent Ways and Means Committee Report, Broken Promise: Why ObamaCare will force Americans to Lose the Health Care Coverage They Have and Like, by Chairman Dave Camp, presents the common belief that many companies will drop coverage for their employees. But Ekblom claims that a large majority of medium-to-large companies in fact will retain coverage and that companies with more than 100 employees that do not offer coverage, and which are not eligible for exchanges, will be forced to subsidize new plans to avoid the more draconian penalty. “In most cases, it may be less expensive to maintain a subsidized ESI,” he noted. “You can’t just look at the penalty; you also must consider the huge tax advantages of ESI.”
“Under the ACA, penalties are not tax deductible, but health insurance costs receive favorable pre-tax treatment,” Ekblom continued. “Further, although an employer could pay workers higher salaries with the savings realized from dropping a health plan, the wage increase will be large.” Also, higher-income workers receive no premium tax credit and are therefore unlikely to purchase insurance at individual rates, he explained, adding that this could leave key employees without insurance.
“Much of the decision may depend on the price of the various exchange plans,” Ekblom said. “Meanwhile, large firms that try to restructure high and low wage workers by limiting subsidiaries to less than 50 employees may find that strategy is prohibited by rules that require the aggregation of related organizations.”
While some companies may opt for a self-funded medical plan, that option typically becomes viable in organizations with at least 150 to 200 employees, he noted. “Self-funded plans must comply with all ACA consumer reforms, such as a requirement that the plan pays for at least 60 percent of the cost of covered services,” Ekblom added.
Small companies may also have issues associated with health care reform. “Employers with fewer than 25 full-time employees during the current tax year may be eligible for federal as well as state health care tax credits,” Ekblom said. “But the limitations and phase outs don’t make them an incentive. Companies will enter the exchange because the have no choice and can’t pay for ESI subsidies.”
The ACA also offers new protection for whistleblowers. “An employee who has been discharged or discriminated against—because they assisted in an investigation into the employer’s failure to comply with requirements of Title I of the act, or if they refused to participate in any activity the employee reasonably believed to be in violation of Title I—can file a complaint with the federal Occupational Safety & Health Administration,” said Ekblom. “This basically creates a new class of protected employees. Employer retaliation is broadly defined, and may include job reassignment, failure to promote, or a pay reduction. Following an OSHA evaluation, the employee may then file a civil action in federal court and obtain a jury trial.” Title I prohibits such actions as denying coverage based upon preexisting conditions, and also includes policy and financial reporting requirements.
Ekblom suggests seeking advice from a qualified professional before doing anything. “The Affordable Care Act is a complicated initiative and, even without the uncertainty over the U.S. Supreme Court case, businesses have many questions about the steps they should take,” he said. “Each company may have unique circumstances, so business executives and owners should consider consulting their legal, accounting and benefits professionals before taking any action or making any decisions. It’s just good business sense.”