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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.

Some employers are willing to take the risk and bet that these fines will pale in comparison to how much they save on health insurance costs. That strategy might work especially well for businesses, such as restaurants, where a good portion of the part-time staff is young and healthy and just wants to make a little extra money. Many of them, employers are betting, would be more than happy to not have to pay the high costs of comprehensive insurance, and at the same time be technically covered and in that way avoid the tax-time fine for not carrying individual health insurance.

But there is yet another quirk in the rules: As long as a company offers at least one plan that complies with the law's requirements, then it can also offer other ones that don't. This means an employer can have one comprehensive plan and charge employees 9.5 percent of their salaries for it, knowing that most of their low-wage works will opt out of paying the high monthly premiums and instead go with the bare-bones plan. And even if an employee does go to the exchange and tries to get a subsidy, he would be denied because he had been offered suitable coverage by the employer. When no subsidy is given, no one is fined.

"It doesn’t meet the spirit of the law but a number of lawyers have reviewed the plans and have said they meet the requirements," said Victor McNight, a principal with EPIC insurance in Petaluma, who has broad experience with these health plans.

"My biggest concern with them is that some employees will lose their right to receive a subsidy and won't be able to enroll in a comprehensive plan because they are being offered a sub par plan. That is why some employers are offering the MEC plan alone, without offering the more robust alternative."

Although Mr. McKnight has his concerns about the plans, he also feels they are filling a void. "While the majority of employers with over 100 employees already offer coverage that meets the requirements" he said, "many do not, especially those in hospitality, ag, retail and staffing. A lot of these companies simply don't have that kind of revenue and those kinds of margins where they can (cover all these workers) and still stay in business. The Affordable Care Act has been a significant burden for those industries."

Mike Parr, employee benefits specialist with George Petersen Insurance in Santa Rosa, said the businesses he works with have not turned to these types of strategies because "all in all, most employers offer benefits to be competitive. On the other hand, what I have seen is businesses cutting down on the benefits they had traditionally offered. Maybe in the past they had offered health, life, disability, vision, and now they can only offer health. Or maybe they used to pay 100 percent of auxiliary benefits and now they will only pay 50 percent."

Mr. Parr agreed that industries that rely on part-time and seasonal work are having extra issues with the employer mandate. "Once all the part-time and seasonal hours are added up," he said, "some businesses discover they are over the 100 full-time equivalent employee threshold and then they need to do something about health insurance." Next year, when the employer mandate goes into effect for businesses with 50 or more full-time equivalent employees "we might be seeing more issues in this area."