Tracey Gavin of Apex Benefits Group wrote a notable column for Inside INdiana Business recently, pointing out the dangers for employers of not being prepared for fallout of the Affordable Care Act. She lists eight common myths that you need to be aware of:
Those answers could help implement solutions that go beyond compliance, but help minimize the financial impact and even capitalize on strategic opportunities through proper planning and preparation.
Myth No. 1: I don't need to worry about Health Care Reform or make any decisions until January 1, 2014.
Truth: Employers need to plan now. Some need to determine their status as "large employer" under the federal statute. Others need to begin the process of determining full-time status for certain classes or types of employees. Failure to do so can trigger maximum penalties – or worse, fines for non-compliance.
Myth No. 2: It is less expensive to terminate our medical coverage plan and just pay the penalty.
Truth: Aside from the impact on employees, many employers will find that once the penalties and tax consequences are accounted for, there may be little to no savings to terminate their coverage. In fact, some will actually pay more by terminating their plan.
Myth No. 3: An employer may ignore the law the first year or two – since they believe the worst that can happen is they end up paying some sort of penalty around $2000 per employee –minus 30.
Truth: No! A dangerous myth. An employer that is subject to the federal law – and willfully avoids compliance – is subject to a fine of $100 per day, per affected person. An employer with 50 equivalent full-time employees that ignored the law (versus an honest mistakes while trying to comply) could be fined $5000 (or more if dependents are included) per day — until the employer corrects the noncompliance. It is clearly noted in the regulations this fine can be levied at up to $500,000 per employer.
Myth No. 4: After health care reform is implemented, most employers will stop offering medical benefits.
Truth: There may be changes to plan offerings and contribution strategies, but few employers plan to drop coverage, according to a Towers Watson and National Business Coalition on Health survey. The reasons to offer coverage to employees have not changed just because health care reform was passed. For example, attracting and retaining employees remains important part of the business operating efficiently.
Myth No. 5: My carrier and broker will take care of everything.
Truth: Some will. Others may not be able to. An advisor's inability to help employers maintain compliance and quantify the financial risks leaves employers vulnerable to serious fines, penalties, excess costs and tax implications. Employers must be proactive and understand the financial viability of their employee benefits programs and impact to their organization.
Myth No. 6: A simple calculation for "pay or play" will provide our company with an accurate projection of financial risk under PPACA.
Truth: Unfortunately, this myth is perpetuated by the many online – or – "black box" calculators in the marketplace. The truth is employers need to do an analysis that captures all the inter-related and moving parts of PPACA that can impact the financial sustainability of their plan. Cost drivers such as plan design, contributions, migration, and many other factors. To complicate this, scenarios need to be modeled precisely and include projecting how changing one factor can in turn impact all the others.
Myth No. 7: Employers that offer a self-funded plan will have very little compliance costs or issues.
Truth: Self-funded plans do in some ways have more plan design flexibility under health care reform and potentially avoid some tax assessments. However, the majority of regulatory requirements apply to groups irrespective of their plan funding. Regardless of funding status, all employers will need to understand the financial ramifications of health care reform to their business and employees.
Myth No. 8: Employees would be financially advantaged by obtaining coverage through Medicaid or the Exchange.
Truth: Maybe. Certainly most individuals qualifying for Medicaid would be advantaged. Individuals who could qualify for tax subsidy may or may not be financially advantaged when premiums and out-of-pocket expenses are compared to employer-sponsored health coverage. Those whose household income is greater than 400 percent Federal Poverty Level (FPL) would be faced with much greater premiums and out-of-pocket expenses compared to employer-sponsored coverage.