(by Slava Darozhkin)
Being an ALE (Applicable Large Employer) is no easy feat under the ACA (Affordable Care Act). Covering 9.5% of household incomes in health insurance costs for over 50 employees adds up faster than you can say “fifty!”.
Unfortunately, the penalties are such that paying for your employees’ coverage is not optional. Did you know that for each eligible employee that doesn’t receive coverage the company can suffer a $2,000+ penalty? A penalty appropriately, if not aggressively, named the Sledgehammer Tax. The penalty does come with the forgiveness of subtracting 30 eligible employees from the amount of employees not being covered, but for every eligible employee not covered after that, the fee is applied per employee.
On the bright side, there are minimum requirements that help ease the burden and set the standard.
As discussed elsewhere, an “affordable” plan is when the employer is covering a minimum of 60% of the total covered costs in the health care plan being offered, as well as including substantial coverage of physician and inpatient hospital services. This calculation does NOT include premiums. Plans built in this fashion are Minimum Value plans as they meet the minimum requirements for ACA.
Modified Endowment Contract (MEC), however, is a different type of plan that is not built to meet the minimum value requirements, but does still qualify the employer as covering their employees and complying with ALE obligations. MEC plans offer spotty coverage with certain well visits and services outlined by the ACA but it is cheaper overall.
Before choosing the plans to dole out to the employees, however, it would be good practice to hear what your employees would prefer. Oftentimes employers forget that employees have obligations under the ACA as well, and they must contribute to their own healthcare - and they have an obligation to be covered. MECs have lower costs than group insurance coverage; your employees may opt for them right alongside you.
While MEC plans are a viable solution to minimum value coverage, the employer is not exempt from being fined 1/12 of $3,000 per employee (called the Tachammer Tax) that receives applicable premium tax credits or cost-sharing reductions.
As usual, we do love hearing from our readers. Don’t be shy and let us know which plans you like to implement in your work space?