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Are You Ready for “Play or Pay” Under the Health Care Act?

If you’ve been following the news, you know that one of the provisions in the Affordable Care Act is an employer mandate that requires “large” employers to provide health insurance for their employees or face a penalty.  This mandate was originally scheduled to go into effect on January 1, 2014.  However, in July, it was announced that, in order to give employers more time to set up systems to comply with the reporting requirements, the employer mandate would be delayed by one year.  If you will be subject to the mandate, you should begin planning for it now, so that you can be in compliance by the beginning of 2015.

Are You Subject to the Mandate?

Under the Act, a large employer is defined as those maintaining a staff of at least 50 full-time or full-time equivalent employees.  These employers are required to offer comprehensive and affordable health care coverage to employees and their dependents or risk a penalty.  Organizations with fewer than 50 such employees aren’t subject to this requirement, which is commonly referred to as “play or pay.”

The Penalties

If your practice is a large employer and doesn’t offer qualifying health coverage to its full-time employees, you might incur a substantial penalty. That is, if just one employee receives a premium tax credit for buying coverage from one of the newly-established state- or federal-run health insurance exchanges, you will have to pay a penalty of $167 per month, or $2,000 per year, for each full-time employee after the first 30.

Even if your practice offers health care coverage to its full-time employees, you might suffer a penalty if the coverage is not deemed affordable or fails to provide sufficient value.  In this case, if just one employee receives a premium tax credit for the purchase of coverage from an exchange, you will have to pay a penalty of $250 per month, or $3,000 per year, for each full-time employee receiving the credit — or, if less, $167 per month, or $2,000 per year, for each full-time employee over the first 30 employees.

Remember that, if your coverage does not qualify under the Health Care Act’s affordability and sufficient value requirements, you may be able to use one of three safe harbors to avoid penalty. Ask your financial or benefits advisor for details on safe harbors.

Additional Points

Here are a couple of additional points to bear in mind:

  1. You must state your position. As an employer, your medical, surgical or dental practice must make an affirmative election to provide health insurance coverage and disclose that election to employees.  (One aspect of the laws that was not delayed was that employees were supposed to be notified by October 1, 2013.  However, the Obama administration has also announced that there will be no penalties for not complying with this provision this year.)  Also, when filing your tax returns, you need to provide proof of coverage and document your contributions to covering the cost of the insurance.
  2. Don’t ignore part-timers. It may not seem like part-time employees are covered by the employer mandate.  When determining large employer status, however, you will need to factor part-timers and hourly staff into the calculation of whether you have 50 employees or more full-time equivalents.

A Necessary Check-In

Many medical, surgical and dental practices will be under the large employer threshold and, therefore, will not be at risk for play-or-pay penalties.  However, the Affordable Care Act is a large and complicated law.  If you are subject to the employer mandate, you should start planning on how to comply with it now.  Even if you are not, you should check in with your financial and benefits advisors about whether and how the health care act might affect you.

If you have additional questions about the Affordable Care Act, contact Larry Sophian at 312.670.7444.

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