Starting in 2014, the Affordable Care Act (ACA) will require mid- and large-sized companies to make payments to the federal government if they do not offer health insurance to their employees and dependents. This employer requirement is high-profile and one of the law’s more controversial elements.
Supporters maintain that the “play or pay” requirement will help strengthen the existing employment-based system by giving more workers access to improved health coverage. Critics declare the requirement will drive up businesses’ costs and force layoffs. Additionally, a handful of large employers have said that making the extra tax payments would actually be less expensive than continuing to provide health coverage to workers. Therefore, they might stop offering health insurance to their employees.
Beginning in 2014, employers with at least 50 full-time employees will have to provide “qualified” health insurance coverage to their full-time employees and their dependents. Qualified coverage is defined as comprehensive (paying at least 60 percent of health care expenses) and affordable (costing less than 9.5 percent of employees’ household incomes). If they don’t, and if their employees purchase coverage instead through a new state insurance exchange with the assistance of federal subsidies, companies will have to make an “assessable payment” of up to $2,000 for every full-time employee beyond the first 30.
Per-employee assessments will also be imposed on employers who offer coverage not deemed comprehensive and affordable, resulting in employees obtaining government-subsidized coverage through an exchange.
The employer requirement is likely to be a subject of debate in the forthcoming 2012 elections, and is indeed already being debated by legislators in both houses of Congress.
This Health Policy Brief examines the issues surrounding the employer requirement, and was published online on March 9, 2011 in Health Affairs.