Health Care Reform Pay or Play Calculator. Sample A

Transcription

1 Health Care Reform Pay or Play Calculator Sample A

2 Pay or Play Infographic With much uncertainty still surrounding the Patient Protection and Affordable Care Act (PPACA), employers across the country are grappling with how the new reforms will affect them. In 2014, "Pay or Play", a clause that forces employers with 50 or more employees to "play" by continuing to offer group health coverage or "pay" a tax penalty, will take effect. Below are a number of telling statistics from recently released reports concerning the Pay or Play mandate. Most Employers Will "Play" Zywave, Inc. recently conducted a survey of over 7,800 employers from across the county, asking them questions about various aspects of health care reform. When asked if employers will continue to offer group health coverage, 77% said that they will definitely or likely continue to offer a group health plan. Only 5% of employers expect to eliminate their coverage, though 20% of employers are still unsure of what they will do in the Eliminating Coverage Not a Favorable Option Truven Health Analytics SM (Truven) recently released a study that identified and modeled four scenarios in which businesses may consider eliminating their group health coverage. These scenarios were then tested for 33 large organizations across a number of industries. The results of these tests led Truven to conclude that, because employers must provide competitive compensation to retain workers, eliminating coverage and shifting the expense burden to employees would not be a favorable option for any of the sample organizations. For a copy of the study, click here. Each of the following four graphs compares the cost for both the employer and employee of continuing to offer group health coverage against the cost of eliminating coverage and employing a different cost containment strategy. All cost is in terms of per SITUATION 1 sees the employer completely subsidize employee participation in a health insurance exchange. In SITUATION 2, the employer has opted to eliminate coverage and subsidize employee participation in an exchange up to the limit of what continued coverage would have cost. SITUATION 3 models the result of an employer eliminating its group coverage and subsidizing employee exchange participation up to 80% (an example of a cost reduction goal) of its previous cost of coverage. For SITUATION 4, the employer has decided to eliminate its entire cost of coverage (except for the assessed penalty) by not subsidizing any employee exchange participation.

3 Summary of Results: Pay or Play Analysis Potential Penalties Full-time employees 155 Potential Penalty (Cost) for not offering coverage to all full-time employees $250,000 Employees paying more than 9.5% of income for single coverage 27 Does the plan pay for at least 60% of covered expenses for a typical population? (See Benefit Plan Input page for percentage) YES Penalty for employees paying more than 9.5% $81,000 Total Potential Penalties Accrued Annual cost of current plan Employee contributions Cost of Providing Coverage $81,000 $1,607,220 -$1,034,652 Value of Federal Tax Deduction -$171,770 Employer's net cost of current plan $400,798

4 2014 Health Care Reform Penalty Projections Presented by: Cornerstone Group Module 1: Current Penalty Projections These are projected maximum penalties based on the information entered in the previous sections. Actual penalty amounts will be determined by the number of employees that receive subsidized health coverage through an exchange. Does the plan provide minumum value (cover at least 60% of costs): Will employer incur penalties for not providing a minimum value plan: Penalty for not providing coverage to all full-time employees: Projected maximum penalty for providing unaffordable coverage: Number of employees paying more than 9.5% of income: Total penalties projected under current plan structure: YES NO $0.00 $81, $81, Module 2: Potential Pentalites and Costs The following are penalties that may be incurred if changes to the plan or payroll are made. These penalties will only be triggered if employees receive subsidized health coverage through an exchange. Penalty amount for eliminating coverage for all full-time employees: Yearly W-2 income below which plan is considered unaffordable: Increase in payroll needed to make plan affordable to all: Single EE contribution/month necessary to avoid fines: $250, $30, $114, $182.96

5 2014 Health Care Reform Penalty Projections Module 3: Current and Projected Plan Costs Stated here are current plan costs, as well as projected costs if changes are made to avoid penalties. New contributions reflect increasing employer contribution to make plan cost less than 9.5% of income. Total annual cost of current plan: $1,607, Total employee contributions (annually): -$1,034, Tax deduction for offering coverage: -$171, Total net cost of current plan : $400, Net cost if employer's single tier contribution increased: Net cost if all full time employees made eligible for coverage: Total plan cost with changes needed to avoid penalties: Current full time payroll: $448, $400, $448, $7,919, Total full-time payroll if wages are increased to avoid penalty: $8,033,806.95

6 2014 Health Care Reform Penalty Projections Display 1: Employer Contribution Change to Avoid Penalties for Unaffordable coverage Current Contribution Mix Employer Net Cost Employee Contribution Adjusted Contribution Mix Employer Net Cost, Employee Contribution, Display 2: Cost of Coverage Today vs. Cost of Cutting Coverage $400, $448, $250, Net Cost of Plan Today Penalties for Completely Eliminating Coverage Cost of Plan with Increases to Avoid Penalties