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Health care cost concerns are not new. In fact, health care spending has exceeded U.S.
economic growth in every recent decade. Rising costs, along with an increasingly complex
health care system, make it even more important for businesses and individuals to have a
clear understanding of their health care benefits, to make smart benefits choices, and to
wisely manage their health care dollars. For employers, health care reform presents multiple
cost considerations, including:
Shared responsibility payment
An important cost consideration for large employers is a provision called the shared
responsibility payment. Starting in 2015, businesses with 100 or more full-time equivalent
employees need to provide affordable, minimum value health care coverage to 70 percent
of all full-time employees and their dependents, unless the employer qualifies for 2015
dependent coverage transition relief, or face a penalty. In 2016, the 70 percent threshold is
increased to 95 percent, and the shared responsibility penalties will also apply to employers
with 50 or more full-time equivalent employees. The penalty is triggered if at least one full-time
employee or their dependent obtains a premium tax credit or cost-share reduction through
the Health Insurance Marketplace. While an employer’s contribution to a health benefits plan
is tax-deductible, the shared responsibility payment is not, and may actually increase an
employer’s cost.
The penalty calculation varies based on whether or not the employer offers affordable,
minimum value coverage to substantially all full-time employees and dependents. If an
employer fails to offer minimum essential coverage to such employees and dependents
1
Cost
Figure 8:
Fundamental Play or Pay Considerations
Play or Pay?
Recruiting,
Retention, and
Productivity
Federal
Premium Tax
Credits
Guaranteed
Issue
Cost
Workforce
Demographics
and
Preparedness
Employer
Size
