Obamacare employer penalties not so simple

There’s been a lot of speculation about what will happen next year when businesses have to offer workers health insurance or pay a fine under Obamacare. 

Will they just take the penalty to avoid the higher costs of providing health insurance, will they find ways to skirt the fine or will they get lucky because the penalty won’t trigger?

Well, the answer is potentially yes to all of the above. Here are a few scenarios.

Under the Radar

The employer mandate under the new federal health law requires businesses with 50 or more full-time employees to offer affordable health insurance.

If they don’t, they could face penalties from $2,000 to $3,000 per employee. The key word here, though, is could.

In order for that penalty to trigger, a worker has to apply for and receive a government subsidy to buy insurance on the state health care marketplace or exchange. That’s the place where people who don’t have – or can’t afford to buy – health insurance can shop for coverage.

It only takes one employee to do this, but if no one does…the company doesn’t have to pay the fine.

Dodging the Bullet

Businesses only face the penalty for full-time employees, those working 30 hours or more a week. So a business (remember this doesn’t apply to small companies) could cut an employee’s hours to below 30 a week and avoid the penalty.

Labor groups report this is already happening at some large retail and service industry chains. There was even proposed California legislation to head this off that I reported on for KQED Public Radio, but it failed to get enough votes in the Assembly last week.

If a business doesn’t want to cut existing workers’ hours it could decide to only fill part-time positions. While the boss would avoid the Obamacare fine this way, she could still rack up costly expenses by having to hire more workers.

Biting the (less expensive) Bullet

Some companies are saying forget about getting around the penalty. They’ll just opt to pay the fine because it’s still cheaper than the average cost of health insurance for an individual, about $6,000 a year.

The law states that the amount of the penalty is calculated after the first 30 full-time employees. A business with a total of 50 employees, for example, would pay a fine for 20 workers, less than half of its employees. This could be substantially less expensive than offering health insurance to all of them.

So the seemingly simple concept of “boss doesn’t offer insurance, pays a fine” is a little more complicated than that.

Luckily the Kaiser Family Foundation has a flow chart to break it down for us. But, yes, it does require a flow chart.

Even with this tangled web of “what ifs” around the penalty, the Congressional Budget Office estimates the government will collect a good chunk of change from these fines.

In its latest projection, by 2023, employers will pay $140 billion in penalties for not offering their workers affordable health insurance.

That’s more than three times what uninsured individuals will likely pay in fines.

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