Blog By: Beth Ede, SPRH
Employer Shared Responsibility Provision (Play or Pay)
Understanding the Requirement – Part II: Should I Play or Should I Pay?
In the previous post we discussed how to determine whether your organization is an “applicable large employer” as it relates to the Employer Shared Responsibility provision of health care reform. So if you are an applicable large employer – now what?
With the complexity of the regulations, many organizations have been asking if they should “play” by continuing to offer health care coverage, or should they no longer offer coverage and just “pay” the penalty.
It may sound straight forward to some, but making the decision involves complexities and factors that vary by organization. Consider the Three Cs when making your play or pay decision.
Cost is more than the black & white penalty for not offering coverage. The penalty also carries additional cost – it is not tax deductible to the organization, while the cost of providing benefits is. If your organization decides to drop coverage and pay the fine, what will the employee expectation be for extra comp? Will you provide additional $$ to purchase coverage? What will the impact be to employees who lose the benefit of pre-tax dollars to purchase coverage? What would be the potential added cost for increased payroll taxes?
What culture exists within your organization and how will this decision impact it? Will the decision result in a more positive bottom line or will it change the engagement and commitment of your workforce and negatively impact bottom line? Will the decision impact your reputation or standing in the eyes of the community? Is your workforce unionized? If so, this decision is not in your sole control. If not unionized, could your decision be a reason for increased union activity?
How do you and your employees view your benefits package – is it a competitive advantage? If the makeup of the benefits plan was to change, what would be the impact? Would you lose key talent to the competition? What would it do to your recruitment plan? How would you stand out in an environment where labor shortages are predicted and candidates may have more of a bargaining chip? When these factors are coupled with questions about the unknown – like whether the exchanges will be a viable alternative to employer coverage – it’s very difficult for employers to make a simple choice about whether to Play or Pay.
The best answer for your organization lies within a thorough analysis of the various factors impacting your specific situation. If WA can be of assistance to you in determining the factors and analyzing the information, please feel free to contact us.