The “Skinny” as a strategy…

As the implications of health care reform become more apparent, large employers are increasingly grappling with coverage options to avoid the penalties. Over the past few months, there has been considerably more attention paid to the problems faced by the staffing industry and similar employers as these temporary and variable hour employees are generally common law employees of the organization, and ultimately such companies are on the hook as it relates to offering health coverage.

One option some employers are looking at is the offer of a “no minimum value plan” – this is a group health plan that provides medical care, but may not satisfy the 60% minimum value threshold. Granted, if an employer offers such a plan that is not minimum value, an employee may apply for a tax credit at the exchange and this could trigger a $3,000 penalty ($3,000 for any full-time employee that receives a tax credit), but this penalty would be lower than the penalty associated with not offering any health plan at all (the $2,000 penalty/every full-time employee).

These types of plans are starting to make their way into the market for just this reason – as a viable alternative to staffing companies and/or other companies that operate in a similar fashion. At the end of the day, it allows employers to satisfy the coverage requirement under the Patient Protection and Affordable Care Act (PPACA) and avoid the hefty penalty associated with that option. So, it minimizes the risk financially. Also, if employees accept the “skinny” plan, they will not be penalized with the individual tax penalty currently in effect for not having coverage – in some respects, a win-win for both parties.

Some employers are using a modified version of this strategy. These employers offer employees two options: (1) a skinny plan, and (2) a richer option with a premium contribution cost that just barely meets the 9.5% wage threshold, which few low income employees are expected to take. This strategy enables employees to opt for the skinny plan that they can afford, while the offer of the richer option immunizes the employer from the play or pay penalties.

A third strategy is to simply offer the richer option and allow it to be unaffordable. For example, the plan could be offered on a fully contributory (i.e., employee pays all) or nearly fully contributory basis. This strategy avoids the “no offer” penalty, although the employer is still liable for the “unaffordable” penalty, but only with respect to those employees granted a premium tax credit.

Keep in mind, these strategies are aggressive. There are those who argue the skinny plans will not provide sufficient coverage to satisfy the “minimum essential” coverage criteria, but under the current regulations, it seems a possibility. Eventually, these plans may not pass muster, but for now there is nothing definitive against going this route so it is something to consider.

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Obama Administration Announces More Delays for Employer Mandate to 2016

The Obama administration announced today that it will extend the deadline for the implementation of the health care mandate for medium sized businesses to 2016.

Employers with 50 – 99 workers are given a two year reprieve on offering health care to their full-time employees. Requirements for companies with 100 or more workers are reduced by 25%.

Larger employer (over 100 employees) are also seeing their requirement to offer health care to their full-time employees reduced from 95% to 70%.

The administration claims that stratifying the two phase-ins for businesses across America will ease the financial and administrative burdens for employers who have not offered health insurance benefits in the past.

The move today was well received by the majority of the business community.  Most believe the postponements will allow employers additional time to understand the applicable rulings that will affect their businesses.

For the full Washington Post Article, click here

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Obamacare rules on equal coverage delayed: NY Times

WASHINGTON (Reuters) – The Obama administration is delaying enforcement of a provision of the new healthcare law that prohibits employers from providing better health benefits to top executives than to other employees, the New York Times reported on Saturday.

Tax officials said they would not enforce the provision this year because they had yet to issue regulations for employers to follow, according to the Times.

Internal Revenue Service spokesman Bruce Friedland said employers would not have to comply until the agency issued regulations or other guidance, the newspaper reported.

The IRS was not immediately available to confirm the Times story.

The rollout of the Affordable Care Act, known as Obamacare, has been marked by a number of delays in implementing certain parts of the law. In November, the administration announced a one-year delay in online insurance enrollment for small businesses.

Technical problems with the enrollment website plagued its launch on October 1, but they have largely been fixed and more than 2 million people have signed up for private insurance. The White House hopes to have 7 million people sign up by March 31, the deadline for coverage under Obamacare.

The law, adopted in 2010, says employer-sponsored health plans must not discriminate “in favor of highly compensated individuals” with respect to either eligibility or benefits.

IRS officials said they were wrestling with complicated questions like how to measure the value of employee health benefits, how to define “highly compensated” and what exactly constitutes discrimination, the Times reported.

The ban on discriminatory health benefits was to take effect in 2010. Administration officials said then that they needed more time to develop rules and that the rules would be issued well before this month, when other major provisions of the law took effect.

A similar ban on discrimination, adopted more than 30 years ago, already applies to employers that serve as their own insurers. The new law extends that policy to employers that buy insurance from commercial carriers.

(Writing by Eric Beech; editing by Gunna Dickson)

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