Certain businesses common to Wine Country, such as restaurants and wineries, are facing extra challenges once the employer mandate of the Affordable Care Act kicks in at the beginning of the year. Lately, some owners have been eying health plan strategies that might fly in the face of the spirit of the law, but still comply with the letter of the law.
[caption id="attachment_100140" align="alignright" width="362"] Victor McKnight, Michael Parr[/caption]
With the Affordable Care Act's employer mandate taking effect on Jan. 1, 2015, employers with 100 or more full-time equivalent employees will have to offer acceptable health insurance to their full-time workers or risk being fined. (The requirement for employers with 50-99 FTE employees does not go into effect until 2016.) All employee hours, full-time, part-time and seasonal, are added up to determine how many full-time equivalent employees a company has. And the threshold to being considered a full-time employee will be just 30 hours a week. This means that certain industries such as restaurants, wineries and retail, which typically rely on a large portion of part-time and seasonal staff, are likely facing hefty increases in their health insurance expenditures. In an effort to keep costs down, some companies are looking into health plans that exploit quirks in ACA rules.
One of these strategies calls for companies offering a minimum essential coverage (MEC) plan along with an option that offers the usual benefits associated with the Affordable Care Act. The plan is set up so that employees have the opportunity to buy the more expensive coverage, which means the company fulfills its mandate to provide adequate insurance. Yet, the underlying intent is that employees will pass on the robust coverage and instead take the paired down but cheaper option.
Here's why it works.
Insurance plans fall into two groups. Group No. 1 is the individual and small-group markets and Group No. 2 is the large-group and self-insured plans.
Group 1 is subject to all the rules associated with Obamacare. They must cover essential health benefits, they can't exceed 9.5 percent of salary, they must meet a 60 percent actuarial value, etc. Every plan on the exchange is a part of this group, as are many plans that are not a part of the exchange.
The rules aren't nearly as stringent for Group 2, the large group and self-insured plans. In the past, large employers were typically the only ones that self-insured. But lately small businesses have been starting to as a means of easing regulatory pressures. These plans still have to offer free preventive care, but they don't have to offer anything else.
One of the quirks of the ACA is that the definition of "minimum essential coverage," which large and self-insured companies have to provide, is not aligned with the definition for "essential health benefits" that an individual's plan has to cover. This means that by offering these bare-bones plans, employers are technically offering health insurance. And that means they escape the $2,000 per employee fine if they don't offer insurance. But they could still be subject to a penalty. If an employee opts out of the company insurance and goes to the exchange, and is able to receive a subsidy because the insurance he or she was offered did not meet the threshold for how comprehensive it needs to be, then that subsidy would trigger a $3,000 fine for the company.