By William Rusteberg
Under the Affordable Care Act (ACA), due to take full effect in 6 months, group medical plans offered by employers must be “affordable.” The ACA definition of affordable simply states that plan participants pay no more than 9.5% of their gross income towards the cost of health insurance. To pay more is unaffordable and punishes the employer with onerous tax burdens.
A Kaiser study shows that nationally the average cost of employer sponsored health insurance ranges from 8-18% of payroll, or a median cost of about 13%:
If an employer were to charge each plan participant 9.5% of gross income, in some cases employees would be funding the entire health plan.
But isn’t this the case now? Health insurance has always been a payroll cost – in lieu of paying employees more they are paid less with the difference going to the insurance company.