By Kristen Ricaurte Knebel
Employers wondering whether they should “play or pay” when it comes to the Affordable Care Act’s shared responsibility provisions should choose to play, an attorney said Feb. 7 during an event hosted by Alston & Bird.
“Employees value health insurance, and that you provide that health insurance. If you didn’t, you would have to pay them more, and the cost of paying them more is greater than the cost of providing that insurance,” said David R. Godofsky, a partner with Alston & Bird in Washington.
The Treasury Department and the Internal Revenue Service released a notice of proposed rulemaking (REG-138006-12) on employer-provided health care coverage under the Affordable Care Act’s employer shared responsibility provisions Dec. 28, 2012. The shared responsibility provisions also are often referred to as “play or pay,” or employer penalty rules.
Starting in 2014, tax code Section 4980H, added by ACA, will require employers with at least 50 full-time and/or full-time equivalent employees (FTEs) to offer affordable health care coverage that provides a minimum level of coverage or pay a penalty.
Coverage Is Valued
Employers currently face no penalty for failure to offer health insurance to employees, Godofsky said. Employers offer health insurance because they know that employees value it as a benefit.
Employees value employer-provided coverage for a number of reasons, chief among them being that it is cheaper than purchasing coverage on their own. Employer-provided coverage allows employees to pay less for group insurance and not pay income and Federal Insurance Contributions Act taxes on the money that goes toward health coverage, he said.
Godofsky said while many have suggested that employers will gravitate toward the idea of dropping coverage because they cialis online assume paying the penalty may be cheaper than offering coverage, that is not the case.
When employers crunch the numbers on whether to offer health coverage to employees or pay the penalty, “it doesn’t matter what assumptions” employers use, he said. Employers will end up offering health coverage to employees because it will ultimately cost less, Godofsky said.
“You might end up increasing the employee premium, you might end up having fewer employees covered, but if you do the analysis, you’re not going to end up” discontinuing coverage, he said.