Since the inception of the Affordable Care Act, brokers and their employer clients have been wondering whether its possible to drop health care coverage entirely and instead pay for employees to go to the exchanges one industry expert now says using a payroll option would allow them to do so legally.
The Obama Administration has come out against employer plans designed to offer pre- or post-tax dollars to reimburse employees for purchasing individual health care coverage on or off the ACA exchanges, but Christopher Condeluci, principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C., says employers can offer a non-conditional cash bonus that employees use to purchase health care coverage.
This is a payment like a salary, he told attendees of EBAs Workplace Benefits Renaissance in Atlantic City Wednesday.
Key to the arrangement, he said, the payment must be an after-tax arrangement and it must be unconditional.
You cant condition the receipt of this employer payment on buying insurance, he said. For example, if an employer pays out a $1,000 bonus it must be able to be used by the employee to buy health care insurance or beer and cigarettes, whatever the employee chooses, he joked.
Although the cash payment cannot be conditional upon the purchase of health care insurance, Condeluci said the employer can use a payroll vendor to allocate the money to be paid to a carrier for monthly premiums.
Offering this unconditional post-tax payment or bonus to employees does not violate recent DOL guidance or federal regulations, he said, but certain employers will be subject to penalties incurred under the ACAs employer shared responsibility rule.
If you have 50 or more full-time employees, you have to offer an affordable minimum value plan, Condeluci said. But, if you are dropping coverage, you are not offering coverage and thus you subject yourself to the employer mandate penalty.
He added, however, that for some employers dropping coverage, offering the after-tax unconditional payroll bonus and paying the penalty may actually be more cost-effective.
You, as a broker, need to sit down with employers to crunch numbers, he advised.
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