The insurance penalty — Employers weigh Obamacare fine instead of coverage

2013-02-23T22:53:00Z 2013-12-17T11:40:39Z The insurance penalty — Employers weigh Obamacare fine instead of coverageMICHAEL BURKE Journal Times

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.

Calculation tool

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.”


Geeta Jensen, president

Jensen Metal Products, 7800 Northwestern Ave.

Employees: 65-70

“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

Employees: 296

“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.

Employees: 155

“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.”

Copyright 2016 Journal Times. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(20) Comments

  1. Zigmond
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    Zigmond - February 25, 2013 6:49 pm
    Forgot to mention the avg cost for family coverage right now is $15,745. Obama lied when they said Obamacaret would save an average of $2,400/yr on premiums.

    RJT should be doing the math. If employers keep private insurance that now costs $15,745 BUT will cost $20,000 an increase of $4,300/yr or pay a $2,000 fine. Shoving the emplyee onto Obama exchanges would save the employer $18,000/yr. What is it the RJT missed, or did they not want to report the truth. Govt herding us into well defined corrals, don't read the RJT to see what is going on.
  2. Zigmond
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    Zigmond - February 25, 2013 6:37 pm
    Our RJT is missing the big picture as usual, Obama's Praetorian Guard is doing his bidding and mudying the waters instead of informing the public. The real story is that Obamacare intencially forces employers to take the $2,000 escape hatch and drop their private coverage. The reason is that with Obamacare "mandated" coverages, the CBO estimated the cost of a private family policy at $20,000/yr for the CHEAPEST coverage. .They are simply FORCING us into a Govt one payer Socialist system. --

    And the RJT is focusing us on the $2,000 penalty, SHAME ON YOU! Do your job and REPORT THE TRUTH! Our lives will not be the same, we are screwed folks.
  3. jrunny
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    jrunny - February 24, 2013 2:17 pm
    sorry yes I have a gateway degree that got me a job that pays me $85k a year.

    Again you fail to prove my post as being false. Now be a good obamy troll and find your facts that prove me wrong.
  4. granny grits
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    granny grits - February 24, 2013 12:31 pm
    All that 'expert' financial advice coming from a person unable to successfully complete an automotive tech program at Gateway. Your mother must be so proud of your accomplishments. Do you have a GED, too?
  5. ggodmuls
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    ggodmuls - February 24, 2013 11:02 am
    She ran out of preparation H and the itching and burning is affecting her mood.

    Granny, please head for Walgreens and resupply.
  6. jrunny
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    jrunny - February 24, 2013 10:36 am
    surely granny you will post links backing up your post. Easy to sit next to the pool and post attacks
  7. granny grits
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    granny grits - February 24, 2013 9:53 am
    Do you really believe any intelligent person would take your ridiculous advice?
  8. ggodmuls
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    ggodmuls - February 24, 2013 9:38 am
    This is truth:

    Our costs for fuel, salt, electricity, emergency services to name a few, continue to rise, and as they do, your services will continually have to be cut. It’s an unwinnable situation.

    Obama's son, John, has spoken. Flee Racine, or lose everything.
  9. ggodmuls
    Report Abuse
    ggodmuls - February 24, 2013 9:37 am
    If Obama had a son, he would be just like John.

    Residents of Racine need to carefully scrutinize their finances. It may be time to seriously consider stopping property tax and mortgage payments and just walk away. Housing values are dropping to zero in Racine, which stands on a fiscal abyss. You have 3 years before the County can even consider taking your home, and due to the number of delinquent homes - it is unlikely they will take it. It can take mortgage companies more than a year to evict you.

    Simply moving to a neighboring community can save you hundreds, perhaps thousands per year. Think FAST! Before the massive tax increases are on you.
  10. granny grits
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    granny grits - February 24, 2013 9:22 am
    The Heritage Foundation is the far right 'wingnut central'.
  11. Just My Opinion
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    Just My Opinion - February 24, 2013 9:19 am
    Simply put.....Obamacare is NOT a good idea unless of course you already rely on everybody else to take care of you.
  12. jrunny
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    jrunny - February 24, 2013 7:44 am
    zorro all these post are telling you the truth about obamacare. It will hurt every american it touches. This link details the danger very well
  13. chhd
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    chhd - February 24, 2013 6:31 am
    -Zorro- "Poorly run companies that wish only to attract lesser-qualified employees will pay a penalty because they are short-sighted."

    A lot of companies that you call the above are employers of lower end salaries and "job market" un-qualified persons. It is not a bad thing just the competitive market they are in. Menard's, McDonald's, Walmart, Burger King, Home Depot etc... who employ hundreds of thousands of people in the lower end tax bracket will always be this way. So what this simply means is that the employees and employers will mostly be under this new "tax/coverage". Which by the way we all will be paying for.

  14. Zorro
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    Zorro - February 24, 2013 1:06 am
    Please be advised that absolutely nothing on this thread so far is true - except my original comment - with the possible exception to the reference to the 2.3 percent tax on medical devices. That is true. There will be a 2.3 percent tax on medical devices to recoup some tax revenue from the 150 percent profit markup commonly charged for these devices.
  15. jrunny
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    jrunny - February 24, 2013 12:13 am
    ment "said"
  16. jrunny
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    jrunny - February 24, 2013 12:04 am
    very well sad had enough. It's easy for obamy trolls to sign the praise I'd obamacare. But will fight like heck to keep thier entitlement butts off it.
  17. Had enough
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    Had enough - February 23, 2013 11:53 pm
    Once again Zorro is a typical, blind spokes person for the tree hugger party. He simply fails to state that under Obamacare, if your employer has more than 50 employees, said employer will either HAVE to offer you insurance or pay a fine. The bottom line is, and silly little Zorro will never admit it, is that Obamacare was designed to make it cheaper for a "capitalist" company to accept a "fine" rather than offer their employees healthcare. It was intentionally designed to get more people dependent on a government program. This has been told all along AMD tree hugger like msnbc and Zorro all called it mis-information. Even now, with the interviews that this left leaning paper has done, die hard socialists like Zorro, STILL refuse to accept the obvious truth.....YOUR PRESIDENT AND TREE HUGGER PARTY HAS BEEN LYING TO YOU FROM THE BEGINNING!!!! You people were just to stupid and blind to listen to everyone else who tried to explain it to you. Even now, Zorro calls the report that the JT did "BS".

    It's ok Zorro" this is what YOU voted for....rejoice. You were a participant in the downfall of a great nation. A nation that was taken over by decadence and selfishnesh. This is what you stop denying it. Be proud of your socialist ideology.
  18. jrunny
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    jrunny - February 23, 2013 11:53 pm
    Great story on the damage the dems and obamacare will do to employee healthcare
  19. jrunny
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    jrunny - February 23, 2013 11:42 pm

    Sorry these truths of obamacare may shock the uneducated. But surveys of companys across the country say 40% will drop insurance. And flood obamacare with members. Just think of the great care you receive today as next year its gone

    Below is a list of 10 of Obamacare?s most costly taxes and fees:

    1. Hospital Insurance Tax. Beginning in 2013, Obamacare increases the Hospital Insurance (HI) portion of the payroll tax from 2.9 percent to 3.8 percent for families earning more than $250,000 a year and for single filers earning more than $200,000 annually. The increased HI tax is also applied to investment income for the first time. The 3.8 percent surtax on investment income is the most economically damaging tax in Obamacare. And these tax increases won?t remain just on families making more than $250,000 a year for long. As the JEC explains, this tax is not indexed to inflation: ?This means that in just 10 years from now, the so-called ?high-income? thresholds will have effectively ratcheted down to $152,000 and $190,000 in today?s dollars.? This tax increase amounts to $210 billion between 2013 and 2019.

    2. Mandate Penalties. In 2014, Obamacare?s individual and employer mandates go into effect, forcing individuals to purchase coverage and employers to offer coverage to their workers. The penalties paid in association with these mandates are an estimated $65 billion between 2014 and 2019.

    3. Health Insurance Provider Fee. Starting in 2014, Obamacare imposes an annual fee on health insurance providers based on each company?s share of the total market. This totals a $60 billion tax hike between 2014 and 2019.

    4. ?Cadillac? Tax. In 2018, Obamacare puts a new 40 percent excise tax on ?Cadillac? health plans, meaning plans that cost more than $10,200 for an individual and $27,500 for families. However, this tax is not indexed to medical inflation, causing it to eventually tax ?Honda? plans at this rate as well. The JEC points out that ?[t]he bulk of revenues from the ?Cadillac? tax would not be paid by platinum health insurance plans, but rather by employees who are forced to exchange tax-free health insurance benefits for taxable wages after employers reduce or eliminate health insurance.? This tax amounts to $32 billion in higher taxes in the first two years of its implementation.

    5. Prescription Drug Fees. Since 2011, Obamacare has put an annual fee on manufacturers and importers of branded drugs based on each individual company?s share of the total market. Between 2011 and 2019, this will amount to a $27 billion tax increase.

    6. Ethanol Tax. In 2010, Obamacare excluded ethanol from the existing cellulosic biofuel producer tax credit. This will hike taxes $24 billion from 2010?2019.

    7. Medical Device Tax. Beginning in 2013, Obamacare imposes a 2.3 percent excise tax on medical device manufacturers. This will raise taxes on patients needing medical devices, who will ultimately pay the tax through higher prices, by $20 billion from 2013 to 2019.

    8. Business Regulation Costs. Beginning in 2012, Obamacare raises corporate taxes through stricter enforcement, because businesses will be required to report more information on their business activities. This will raise taxes $17 billion from 2012 to 2019.

    9. Reducing Medical Deductions. In 2013, Obamacare raises the floor on itemized medical deductions from 7.5 percent of adjusted gross income to 10 percent, meaning Americans must spend 2.5 percent more of their income before they get a medical deduction, costing $15 billion from 2013 to 2019.

    10. FSA Limits. Starting in 2014, Obamacare limits the amount of pre-tax dollars that taxpayers can deposit in flexible savings accounts (FSAs) to $2,500 a year. This results in an extra $13 billion in taxes from 2014 to 2019.
  20. Zorro
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    Zorro - February 23, 2013 11:17 pm
    This is a false calculation that misinterprets Obamacare. There's no requirement that any business provide insurance coverage for employees, no matter how many they have. Thus, there's no "choice" between offering employee insurance or paying the penalty. Good companies that wish to attract the best employees will continue to offer health care coverage, as they always have. Poorly run companies that wish only to attract lesser-qualified employees will pay a penalty because they are short-sighted. But no company is required to provide health insurance for their employees, under Obamacare or any other government regulation. It just a question of how stupidly they wish to run their business.
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