Many employers were relieved to hear the Play or Pay Mandate had been delayed until 2015. Employers happily put off worrying about some of the ACA’s provisions for one more year. However, few employers have thought of the employee relations nightmare the delay created for certain employers.
Consider the following example to illustrate the potential nightmare scenario. Suppose Stan works in a manufacturing plant (that has several hundred employees) making $10 per hour. Stan takes two weeks of vacation each year so his yearly income is $20,000. Stan lives in Clayton County, Georgia and has no other income or dependents. The manufacturing plant has never offered health benefits to its hourly employees and after the delay to the Play or Pay Mandate the employer put off extending health benefits to its hourly employees until 2015. This example is not limited to the manufacturing industry, in fact, it is likely more prevalent in the restaurant and hospitality industry where hourly employees have not received health benefits.
In 2014 Stan elects to purchase his insurance through the State Exchange in Georgia. An important question is whether Stan is eligible to receive a premium tax credit. Stan’s income, $20,000 per year, is equal to or exceeds 100 percent of the federal poverty line, but does not exceed 400 percent of the federal poverty line. Assume Stan is not eligible for a government plan such as Medicare, Medicaid, or TRICARE. As stated above, Stan’s employer is not offering coverage in 2014. Finally, Stan does not have a spouse so he is not eligible for a spouse’s health plan. With this information it can be determined that Stan will be eligible for a premium tax credit in 2014. Given Stan’s income and location Stan would be able to purchase the lowest cost bronze plan with the assistance of a premium tax credit for $19 per month. Therefore, in 2014 Stan will pay 1.1 percent of his income to receive the cheapest bronze plan in Clayton County.
In 2015, if the manufacturing plant decides to avoid the penalties associated with the Play or Pay Mandate, the employee’s payment for a bronze plan cannot exceed 9.5 percent of the employee’s household income. For an employee making $20,000 per year, an employer doing the bare minimum can comply with the Play or Pay Mandate by charging an employee like Stan $158 per month for bronze coverage. Put another way, Stan will have to pay $139 more dollars per month for essentially the same bronze coverage he had in 2014. Stan would be paying 9.5 percent of his income to receive the employer’s coverage compared to 1.1 percent in 2014 when he had access to a premium tax credit.
This scenario could lead to difficult employee relations for employers. Nobody likes to have money taken away from them and employers will essentially be doing just that by quashing their workforce’s eligibility for premium tax credits by offering compliant employer coverage. At the same time, the demographics of certain employers makes paying the penalty associated with the Play or Pay Mandate a bad financial decision. Prudent employers will be aware of this potential issue and take the appropriate action given their workforce’s demographics.
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