Furthermore, companies can be subject to penalties if the cost of “self only” insurance is more than 9.5 percent of an employee’s income and the employee enters the exchange. If the cost is higher than the 9.5 percent threshold, the insurance is deemed “unaffordable,” and the employer is penalized at $3,000 per full-time employee who opts for the exchange.The Exchange
Each state is supposed to establish a health care exchange by 2014, where its citizens can shop for health insurance among plans offered by various private insurers. Most states, however, have refused to implement the exchange. This in turn will place the burden on the federal government to pick up the expense. At this point, no one knows what the exchanges will look like or how they will work, but most experts envision a website that will function like a traditional e-commerce website.
Starting in March, employers will be required to provide a written notice to employees explaining how the exchanges will work, and the employee’s option to decline the employer’s insurance in favor of the exchange. If the employee purchases coverage through the exchange, the federal government will provide premium assistance in the form of an “advanceable” tax credit based upon income level and number of dependents.
Employees making up to 400 percent of the federal poverty level are eligible for the subsidy. That equals roughly $90,000 for a family of four.
In all, some employers may find little impact on participation in their plans, while others may see a mass exodus to the exchange. If the latter happens, the employer group will be smaller, likely driving up costs further. It’s therefore incumbent on employers to be prepared and model out a worst-case scenario — and sooner rather than later. David L. Barron is a member in the Houston office of law firm Cozen O’Connor, with a focus on litigation practice on labor and employment law. He can be reached at firstname.lastname@example.org.