The Sharks are Circling – Seek Refuge in a Private Exchange Now!

July 9, 2014

Just when you thought it was safe to go back in the water – the IRS bites. Its recent ruling on dumping employees into the public health exchanges has many employers scratching their heads and asking “hmmm, isn’t the point of the Patient Protection and Affordable Care Act to get more people health care coverage?” Why then would the IRS impose hefty penalties on employers who provide a subsidy for employees to go out and seek health care in the public marketplaces?

The IRS isn’t saying you can’t dump your employees, they’re just saying you’ll pay a price for it; a $100 a day price for each employee. The ruling is definitely aimed at large employers who discovered that they could save money by requiring employees to seek coverage in the public marketplace. But, and it’s a big but, employers can just not offer healthcare altogether and pay a $2000 a year fine per worker under the so called “employer mandate,” much lower than the $100 a day fine. Where’s the incentive to do anything other than stop offering insurance altogether?

It exists and so do alternatives to “dumping.” While the IRS ruling seems a bit counter-intuitive to us, finding a way to offer healthcare coverage to employees and comply with the Affordable Care Act at the same time just makes sense. There’s no indication that the IRS ruling applies to coverage offered in private health exchanges and healthcare coverage continues to be the biggest benefit employers can offer to attract the best talent.

We’ve talked endlessly here on our blog about the flexibility, security and choices private exchanges offer. There’s no need to reiterate those benefits here except to say that we’ve probably left out one big advantage to private exchanges in all of our discussions, and that is, to the extent the employer has offered plans that are both government and IRS compliant – they meet all the requirements under the ACA and employers will not have the government or the IRS breathing down their necks. No penalties. No hassles.

Feel better? We sure do. It had to be said.

(Here is a handy flow chart from the Kaiser Family Foundation on the penalties related to the Affordable Care Act, in case you’ve missed it.)

Originally posted by John Reynolds of CieloStar on Thu, May 29, 2014.

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