This is part of an eight part series of how to cope with the implementation of Obamacare. Part four: Decide Where to Shop.
Once you’re fairly confident which boat you are in--small or large employer--you can start making some decisions. First and foremost: Will you offer employee coverage?
If you’re a small employer, you don’t have to; the law doesn’t require it. And now that public health exchanges make guaranteed, “affordable” coverage available to individuals and families, employees of small companies are not as dependent on work-based health plans as they have been in the past. “You have to ask whether employer-sponsored coverage is an important part of employee retention and attraction,” says Michael Bodack, a broker with York International in Harrison, New York. “For some small companies, there’s no downside to dropping coverage, paying people a couple of extra bucks, and sending them to the exchange.”
If you’re a large employer thinking of adding or expanding coverage in 2014, you might want to wait. A 2013 study by researchers at the Stanford School of Medicine found that roughly 37 million people now getting employer-sponsored insurance would be financially better off getting coverage through public exchanges.
Largely this is because they could qualify for credits and subsidies available to individuals and families earning up to 400 percent of the federal poverty level. Although the ACA limits how much you can ask workers to pay for self-only coverage, there is no requirement that you subsidize their family members as generously. As a result, the cost for family coverage through an employer could be double or triple what it would be through an exchange.
In 2013, covered workers contributed an average 29 percent of the premium for family coverage, or $4,565, according to the Kaiser Family Foundation. Say one of your workers makes $35,000 a year and has a nonworking spouse and two kids.
Average-priced employer coverage for the family would cost about 12 percent of household income. If this same family went to a public exchange, it would qualify for subsidies on the basis of household, not individual, income. As a result, the employee could buy a silver-level family plan for just $1,373 per year, or about 3.9 percent of household income after subsidies.
The catch: Neither employees nor their family members can claim exchange subsidies if self-only affordable coverage is available through their work. The only way to make sure they can get the subsidies is to not offer that coverage. That will open you up to a $2,000 per-person annual penalty, after your first 30 workers, in 2015. (Unless you try a skinny plan approach; see No. 6.) But, Blumling says, “it could make more sense to pay the penalty for your employees’ benefit.”