I know you pros aren’t huge fans of the pay or play provision of the Patient Protection and Affordable Care Act; truth be told, I’m right there with you.

And while several of you dinged me a couple weeks ago in the comments — basically saying that there are lies, big lies and statistics — there are polls that show most employers intend to play rather than pay when the provision becomes effective in 2014. 

But new info from Mercer shows that more than a third of you are at risk of having to do both — providing coverage, but having it be considered “unaffordable” under the law, thus subject to per-employee penalties.

Mercer finds that 38% of employers have at least some employees for whom coverage would be considered “unaffordable,” based on data collected from nearly 3,000 employers through its 2009 National Survey of Employer-Sponsored Health Plans.
 
PPACA requires employers who provide health benefits to make sure the coverage is “affordable” — meaning that full-time employees be asked to pay no more than 9.5% of their household income for coverage.

However, in true government fashion, employers will have to wait for further guidance on what levels of coverage the 9.5% affordability standard applies to, what is included in the definition of income, and whether the affordability percentage applies to all plans offered by an employer or just the lowest-cost plan. Never mind how in the world employers are supposed to determine each employee’s household income. Sigh …
 
At any rate, if coverage is “unaffordable” by this definition, and just one employee receives government assistance to buy individual coverage through a health insurance exchange, the employer is on the hook for a $3,000 per-employee annual penalty (to a maximum of $2,000 times the number of full-time employees in excess of the first 30).

Using a calculation that compares the contribution requirements for an employer’s most subscribed medical plan to the average full-time employee salary in their organization, Mercer concludes that 38% of all employers have at least some employees for whom coverage would be considered unaffordable.

While this percentage might be lower if household income rather than employee salary were considered, 31% of all employers with 500 or more employees and 20% of those with 20,000 or more employees are at risk of incurring the penalty.
 
“Lawmakers did not take into account that employers don’t have access to information on employee household income,” says Tracy Watts, a partner in Mercer’s D.C. office. “Employers question how they are going to get that information and what other administrative challenges might come along with this new requirement. For example, what happens if an employee’s total family income changes during the course of a plan year?”

Yes, HHS/IRS/DOL — what indeed does happen?

More to come in the coming days on Mercer’s findings on how PPACA will make administering your plans more — ahem — challenging.  Meanwhile, have you begun planning how you’ll make your plans “affordable” and how you’ll attempt to determine if they’re “unaffordable”? Share your ideas in the comments.

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