RACINE COUNTY — A provision in the Affordable Care Act essentially would allow an employer of 50 or more people to pay a financial penalty instead of offering health insurance.
But, at least at this point, it’s not easy to find an area company planning to take that route.
The ACA provision applies to companies that employ at least 50 full-time-equivalent people. A company of that size not providing health insurance would pay a $2,000 per-head penalty, excluding the first 30 full-timers. The “assessments” are meant to partly offset the effect of sending those employees to the new insurance-buying exchanges scheduled to start next Jan. 1.
The U.S. Department of Health and Human Services, which is writing regulations for the enormous health care law, estimates fewer than 2 percent of large American employers will have to pay the penalty.
For employees between 100 percent and 400 percent of the federal poverty level — for example, $23,500 for a family of four — the penalty would be $3,000 if the company’s insurance was deemed unaffordable: exceeding 9.5 percent of the employee’s income.
CliftonLarsonAllen, a certified public accounting firm with a Racine office at 222 Main St., has designed a health insurance penalty calculation tool. It’s designed to help client companies decide whether to offer health insurance to employees.
It’s not a simple matter of comparing $2,000 with the cost of offering insurance. “Most companies wish it were as simple as comparing a flat cost per employee to the penalty,” the company states in a written response to a Journal Times question.
Instead, there are complexities in the ACA as well as competitive considerations in making the decision, the CPA firm points out.
For example, there is a tax on “Cadillac” insurance plans. That tax is designed to help cover high-risk people, said Rick Krueger, a manager at CliftonLarsonAllen.
All the calculating in the world probably won’t tell an employer how its costs will change under full ACA implementation, said Krueger, the firm’s expert on national health care. “I think a lot of companies don’t realize how much their costs could fluctuate in either direction,” he said.
Companies that will experience the largest cost increases, he said, would be those with the most employees currently not taking the company’s insurance. That’s because the “individual mandate” that everyone get health care coverage would push those people onto the company’s plan, Krueger explained.
Top of the list
Krueger and Mark Gelhaus, a partner in Racine’s CliftonLarsonAllen office, said many companies haven’t yet carefully considered the insurance-or-penalty question.
“But this is definitely at the top of their checklist,” he remarked.
Should a company elect to drop insurance and pay the penalty, hardest-hit employees would be anyone over 400 percent of the poverty level, Krueger said. “They would take
the full impact,” because they would go to the insurance exchanges without benefit of a government subsidy.
Of companies that have decided, Krueger said, “The vast majority of companies we deal with plan to continue offering insurance — it’s just a matter of whether they will change some of the cost-sharing and so on.”
He commented: “Generally it would not be a good idea, in my opinion, to drop coverage.”
Other Racine County companies contacted this week seemed to agree.
For example, Merchants Moving & Storage, 1215 State St., will keep its insurance, said Jennifer Eastman, controller. “We will continue to provide the best benefits we can to remain an attractive employer.”
Meanwhile, Merchants, employer of 111, has been rolling out new wellness initiatives such as hiring a half-time nurse, Eastman said.
That’s both to limit insurance cost increases and because Merchants believes there may be government incentives for such actions.
With the new initiatives, Eastman said, “We hope to have a culture switch here.”
WHAT LOCAL EMPLOYERS SAY
Geeta Jensen, president
Jensen Metal Products, 7800 Northwestern Ave.
“We have good insurance, and I think it’s important (employees) get the same kinds of benefits as before.”
“There’s something more than just money in these things. ... Many of them won’t even know how to go about going through the (insurance) exchanges. Why put them through all of that, when we can stay in business?”
Jeff Rzepinski, controller
Elwood Corp., 2701 N. Green Bay Road
Employees: about 65
“At this point we will keep the insurance,” for competitive reasons.
“Not to say that couldn’t change in the future.”
Rob May, human resources manager
McLane Foodservice, 1906 Grandview Parkway, Yorkville
“We continue to explore options as more information comes out on the law. Decisions for next year have not been made yet.”
John Baker, vice president of manufacturing
E.C. Styberg Engineering, 1600 Goold St.
“We would probably be penalized because it’s a Cadillac plan.”
Baker said he’s been reading that many companies will drop insurance coverage — and that the government will change some provisions in response.
“We plan on having a lot of meetings with the union group way in advance (of the contract ending). We will be straightforward with them, but we can’t do that now.”