Friday, July 12, 2013

How ACA requires employers to "share responsibility"

SEC. 1513. SHARED RESPONSIBILITY FOR EMPLOYERS.

    (a) In General- Chapter 43 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING HEALTH COVERAGE.

[...]
    `(c) Large Employers Offering Coverage With Employees Who Qualify for Premium Tax Credits or Cost-sharing Reductions-
      `(1) IN GENERAL- If--
      `(A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and
      `(B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and 400 percent of the applicable payment amount.
      `(2) OVERALL LIMITATION- The aggregate amount of tax determined under paragraph (1) with respect to all employees of an applicable large employer for any month shall not exceed the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month.
From the text of Public Law 111-148, the Patient Protection and Affordable Care Act.

Emphasis added on key phrase.

In other words, if even just one employee gets a "premium tax credit or cost-sharing reduction," for getting insurance from the exchange outside the employer, then the employer is penalized as if all full-time employees got a tax credit.

Employers are also discovering the "low-benefit" coverage ACA requires does not require they cover what most insurance covers today: hospitalization.

If even just one employee finds his coverage is insufficient and purchases his own coverage through the exchange to cover hospitalization, that employer is penalized as if all full-time (30 or more hours per week) employees did that as well.

Thus, even if employers only need to spend "$40 to $100 a month per employee" for a low-benefit plan, they may not even provide that if they still end up with the "$2,000-per-employee penalty for providing no insurance" for all their full-time employees.

If those developing the federal exchange systems are planning on only a relatively tiny fraction of Americans enrolling, they may be in for an even more overwhelming surprise during the "largest ever" open enrollment season this fall.