Small group, employer mandate

The individual market is roiling with policy cancellations because of Obamacare.  This is because of rate repricing brought on by the PPACA.  There’s much complaining, and it’s not unwarranted, but it is nevertheless poo-poo’d by ACA supporters.  Though numbering perhaps 15 million, individual policy holders are said to be a small portion of the privately covered market.  Ostensibly they just buy a new policy to replace the old one.  Maybe it’s more expensive, but maybe (with subsidies) it’s not.  And policy shopping is a drill that individual policy holders are used to.

2014 brings the employer mandate of Obamacare.  Employers with 50 or more employees are to cover / offer their workers health insurance, or face a fine of roughly $2500 per employee.

This is a shoe yet to drop, so the disruptive effects can only be speculated.  But the prevailing thought is a $2500per worker fine is less than the cost of providing the fringe benefit of health insurance.  Thus an acute monetary incentive will motivate employers to terminate their plans and dump workers onto the Obamacare exchanges.  There’s a notion floating around that the OMB/CMS/CBO forecasts that say 75 – 100 million people on small group employer coverage will have those policies canceled.

This would be, shall we say…highly disruptive.  Inasmuch as it can be poo-poo’d and soft pedaled, there’s some happy talk that says having shed their health costs, employers will be able to gross up paychecks and mitigate workers’ high insurance costs on the exchanges.

I’m on a small group employer plan and highly motivated to discern what might be true, so let’s work through the numbers, using me as an example.  My coverage is OK.  What I pay for it is OK, not great.

My employer has over 50 employees, and they offer coverage.  They make an employer contribution to my premium that amounts to $212 a month currently (based on age).  Rates for 2014 are not yet released, but you can assume with certainty they’ll be higher.

$212 * 12 = $2514 vs a penalty of $2500.

Safe assumption is 2014rates will allow my employer’s contribution to healthily exceed $2500.  I suspect this will be the case for the average of all employees.

So for company tax accounting you take an itemized expense for premium contributions, right?  The relative numbers being what they are right now, I’m not sure under the circumstances you give away that expense itemization so that you can pay the fine.  It’s an honest and open question by me.

Assuming you do though, there’s no delta there from which you can gross up the employee’s check.  That my friends, is a fairy tale.   Worker checks are not going to ever see a dime of that company savings.  It doesn’t flesh out as a big enough savings to bother splitting with the employee.  It all goes to the employer.

But what if it did go the employee?  Would it help?  If employer contributions were $3000, and the fine was $2500, ostensibly there would be $500 in savings to gross up to the worker.

Mind you, the typical Obamacare premium increase is noted as 41% (Manhattan Institute).

My employee contribution to my health insurance is $13000 a year.  If I have to go into the exchanges for a policy 3-4-5 thousand dollars more expensive than that, $500 will be a meaningless gesture.  I’m going to feel shafted.

If I have to go into the exchanges and get a policy with higher deductibles and out of pockets, that’s not doing me any good.  Families with children use health services quite a bit.  I’m going to feel shafted.

This is the stuff that makes for electoral earthquakes, and as I said before, I can’t see it being allowed to happen.  ACA will get repealed.


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