Now Is Time for Employers to Consider Affordable Health Insurance as ACA Takes Off

Nov. 11, 2013

LINCOLN, Neb. — Despite controversy, delays and glitches the Affordable Care Act took a leap closer to becoming fully implemented in October.

Both the employer and individual mandates moved forward with employers notifying employees about their health insurance options and the state exchanges officially opening online for individual signups. Both events are related and significant for Nebraska business.

Businesses understand that to retain a quality workforce, they may need to offer health insurance. They should consider affordability as defined by the Affordable Care Act when making decisions about which group plan(s) to offer.

According to a study by the ADP Research Institute, employer-sponsored health insurance is typical of the gold level plans offered in the individual Marketplace and is less expensive.

Although offered employer-sponsored health insurance, employees may use the federal marketplace (healthcare.gov) to comparison shop for plans they think may better meet their individual or family needs in terms of coverage and affordability.

If an employee purchases health insurance in the marketplace, rather than enroll in an employer-sponsored plan, a small employer is under no statutory obligation to contribute to the payment of the employee's health insurance.

It's a different story for large employers, or those with 50 or more full-time equivalents. The ACA does not explicitly mandate that large employers offer affordable health insurance, however, it does impose penalties if, even just one full-time employee purchases insurance through the individual Marketplace and receives a premium tax credit (subsidy).

Therefore, when considering the affordability of group health insurance, large employers need to look closely at the wages and salaries paid to employees who are offered insurance. To meet the ACA affordability requirement, the employee's premium contribution for self-only coverage cannot exceed 9.5 percent of the employee's yearly W-2 wages.

For individuals and families with household incomes falling between 100 percent and 400 percent of the federal poverty levels they may be eligible for premium tax credits should they purchase coverage through the marketplace.

In 2014, premium tax credits will be applied toward individuals with incomes up to $45,960 and families of four with incomes up to $94,200. The premium tax credits will be offered on a sliding scale with the lower income households receiving more credits.

Penalties will be waived for employers providing affordable coverage to at least 95 percent of their employees. To minimize the risk of ACA penalties, some employers may have to increase participation rates in their health coverage plan by increasing premium supports for lower-wage employees.

As of July 2, 2013, this shared responsibility or "pay or play" provision deadline was delayed until Jan. 1, 2015. Between now and then, large employers should take a critical look at their options for providing affordable health insurance to their employees.

To learn more about the Affordable Care Act and the provisions mentioned above, employers can go to UNL Extension's website at http://eship.unl.edu/healthcare. In addition they can view a webinar at http://learn.extension.org/events/1268.

 Developed by UNL Extension, these are meant to be a starting place for employers to learn more about the ACA so they can better work with their attorneys, insurance agents, accountants and human resource managers to develop business strategies for complying with the law.

For more information, email the UNL Extension ACA Team at ACAbizNE@unl.edu or contact one of the team members:

Carroll Welte 402-374-2929

Extension Educator, Burt County

Marilyn Schlake 402-472-4138

Extension Educator, Department of Agricultural Economics

Charlotte Narjes 402-472-1724

Program Manager, Department of Agricultural Economics

Jim Crandall 308-995-3889

Associate Director, Nebraska Cooperative Development Center

Department of Agricultural Economics