Pay or Play – What Employers Need to KnowHR Resource
April 8, 2013 — 2,255 views
The number of people who are uninsured is substantial enough for the government to take it seriously and come up with ways of reducing the numbers. Over the years, a number of laws and propositions have been brought forward. But none of them have generated as much interest as the pay or play mandate. This is a mandate that is aimed at the employers to ensure that every family gets an insurance policy to cover their basic to intermediate medical needs at least.
The Basics of Pay or Play
According to the survey the government conducted, every household has a working member who has a salaried job. But that doesn’t mean that the salary is sufficient to maintain the household medical costs. So, the employer who has employed the person should give every employee an insurance policy that will cover the medical expenses of the family. The employer cannot give a small policy with minimum cover, as the pay or play mandates require you to cover all the costs of the employee’s family including prescription drugs.
In the event of an employer failing to give the employees insurance coverage, the employer will be fined by the state government. The government of Massachusetts recently enacted a reform that will levy a penalty on you which you will have to pay to the government. The logic behind this mandate is that in case the employer is unwilling to pay for the insurance, the health care costs will have to be borne by the government. The financial penalty that the employer pays to the government will go towards reimbursing these medical costs that the government has to bear.
Penalty Might Differ from State to State
Also, another fact that employers should keep in mind is that the penalty levied by the pay or play clause is not uniform throughout the country. It will depend on the state government and the decisions taken by the elected officials of that state. For example, the state of California is considering a larger penalty for the employers.
Considerations of the Employers
Employers cannot give an insurance policy to the employee from their own pockets. The obvious path is to give the insurance and deduct it as a tax benefit to the employee. However, what about the minimum waged employees who do not pay tax? If the productivity of the employee does not reach the limit of the wages paid plus the insurance premium, you will have no other option than to terminate the services of that employee.
PPACA to the Rescue
The PPACA or Patient Protection and Affordable Care Act, also popularly known as Obamacare, is the law that the federal government passed under the current President Barack Obama. This law will allow companies to compare and give insurance coverage to every employee and citizen of the United States. The law also allows a subsidy, if necessary, from the government to the employer so that insurance coverage can be granted to all the employees of an organization, irrespective of their wages.
As an employer, you have a lot to consider in terms of giving the employees insurance coverage. You should be able to calculate the overall productivity of the employee in terms of the returns the company is getting from him/her. Based on this, you can look at the insurance policies offered, and choose the one that gives the employee sufficient coverage. In case you cannot cover the costs, you can apply for a government subsidy, but that comes later.