When it comes to Obamacare compliance, most employers are preoccupied with the number of full-time workers they have on staff. But there’s another shared-responsibility factor that has the potential to blindside many firms.
All it takes is a handful of employees to foil a company’s Obamacare compliance efforts and leave that firm owing a significant amount in penalties.
That was one of the major takeaways from David A. Lindgren’s presentation at the 2014 annual Society for Human Resource Management (SHRM) Conference and Exposition in Orlando, FL.
The lure of the exchange
Lindgren made it a point to warn employers that on top of offering healthcare coverage to 95% of their full-time employees, they must also worry about the workers who opt to get coverage via the insurance exchange.
That’s because if just one full-time employee applies for healthcare coverage through the insurance exchange, and receives a premium tax credit, then the company will also be penalized.
Lindgren offered the following hypothetical example:
Say company with 500 employees does offer healthcare coverage to all full-time workers; however, the coverage offered to 50 of those workers is deemed unaffordable.
Then, those 50 workers head to the Exchange and each of them qualifies for a premium tax credit.
Here’s how the penalty would be calculated:
50 x $3,000 = $150,000 in total penalties.
The law requires the company to pay $3,000 for every worker that receives a subsidy or $2,000 for each full-time employee within the company (not counting the first 30 employees), whichever is less.
Nearly $1 million in penalties
Of course, the penalties for not offering coverage at all can be enough to convince firms that compliance is the right strategy to take as well.
Lindgren used the same hypothetical company to drive home this point.
Example: An employer with 500 employees doesn’t offer coverage to its full-time workers, and just one employee applies for coverage on the Exchange and receives a premium tax credit.
Here’s an eye-opening look at how the penalty is calculated:
500 (total FTEs) – 30 (“free” employees under the law) x 2000 = $940,000 in total penalties.
Source: “Healthcare Reform: Where Are We Now?” by David A. Lindgren, presented at the 2014 SHRM Conference and Exposition in Orlando.
