Few employers to face ACA’s “play or pay” penalties, but many still feel the pain
April 13 2016 - 9:05AM
Business Wire
Employers have made their opinion about the excise tax clear.
There is another Affordable Care Act (ACA) provision, however, that
irks them nearly as much, and that is the “play or pay” rule – the
mandate to offer coverage that meets ACA requirements or pay a
penalty. In a recent survey of 644 employers, Mercer asked
employers what changes they would like to see made to the ACA.
Repealing the excise tax was first, with 85% in favor, but
repealing the employer mandate was second, favored by 70%.
“It’s not because they don’t want to offer coverage. It’s
because proving that they offer coverage is so much work,” said
Tracy Watts, Mercer’s leader for health reform.
The deadline for reporting to the IRS about coverage in 2015 was
extended from January to June, and at this point most employers
have a handle on their results. Virtually none of the survey
respondents believe they will be liable for the “a” assessment –
meaning they all offered coverage to substantially all employees
working 30 or more hours per week. And just 8% thought they might
be at risk for the “b” assessment – meaning that some of their
employees might qualify - and obtain - subsidized coverage on the
exchange because their employer’s plan did not offer affordable
contributions or meet minimum plan value requirements.
“This suggests that penalties are not going to amount to a huge
source of revenue,” said Beth Umland, Mercer’s research director
for health and benefits. The CBO had estimated that employer
penalties would raise $9 billion in revenue in 2016.1
Has the employer mandate resulted in more workers gaining
coverage in employer plans? About three-fourths of survey
respondents say that their enrollment levels have not changed due
to the ACA. While 22% have seen an increase in enrollment, most say
the increase was slight (less than 5%), and 4% of respondents say
enrollment has decreased. The most recent CBO study reports
virtually no change in the number of people obtaining health
insurance from their employer since the law was passed. In 2016,
155 million people, or 57% of the population under age 65, will
receive employment-based coverage. 2
When asked about the impact of the ACA on their organization,
20% of survey respondents say they have experienced higher cost and
29% say they have made unwanted plan design changes to avoid excise
tax exposure. At the same time, 84% say that the additional
administrative burden has had a significant impact – and 51%
describe it as “very significant.”
In addition, the requirement to offer coverage to “substantially
all” employees working 30 or more hours per week will get harder to
meet in 2016 when the definition of “substantially all” increases
from 70% to 95%. Limited duration employees, like long-term temps
and interns, could trigger an assessment. About one in four
respondents say they will pull back on use of these workers, and
another 16% are considering it.
“More than half of Americans already get their health insurance
from their employer, and three out of four workers are satisfied
with their health benefits,” said Ms. Watts. “Under play or pay,
employers have had to modify their plans, track worker hours,
manage eligibility and report coverage to prove they are doing
something they have been doing all along.”
About Mercer
Mercer is a global consulting leader in talent, health,
retirement and investments. Mercer helps clients around the world
advance the health, wealth and careers of their most vital asset –
their people. Mercer’s more than 20,000 employees are based in 43
countries and the firm operates in over 140 countries. Mercer is a
wholly owned subsidiary of Marsh & McLennan Companies
(NYSE:MMC), a global professional services firm offering clients
advice and solutions in the areas of risk, strategy and people.
With annual revenue of $13 billion and 60,000 colleagues worldwide,
Marsh & McLennan Companies is also the parent company of Marsh,
a leader in insurance broking and risk management; Guy Carpenter, a
leader in providing risk and reinsurance intermediary services; and
Oliver Wyman, a leader in management consulting. For more
information, visit www.mercer.com. Follow Mercer on Twitter
@Mercer.
1 Congressional Budget Office, Budgetary and Economic Effects of
Repealing the Affordable Care Act (June 2015).
2 Congressional Budget Office, Federal Subsidies for Health
Insurance Coverage for People Under Age 65: 2016 to 2026 (March
2016).
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MercerBruce Lee, 212-345-0553bruce.lee@mercer.com
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