Study: Health law could mean penalties for one in three employers

May 24 2010

News outlets covered analyses of health law provisions affecting businesses.

"About one-third of employers subject to major requirements of the new health care law may face tax penalties because they offer health insurance that could be considered unaffordable to some employees, a new study says," The New York Times reports. The survey, of nearly 3,000 employers, by Mercer, "one of the nation's largest employee benefit consulting concerns ... found that one-third of employers had some workers for whom coverage might be 'unaffordable.'" One provision of the law says that if employee premiums that cost more than 9.5% of their household income, "the coverage is deemed unaffordable, and the employer may have to pay a penalty."

To avoid the penalty, employers "could increase their contributions to premiums. They could reduce the workers' share of premiums but recoup the money in other ways — for example, by increasing co-payments or deductibles. They could offer lower-cost health plans, with less generous coverage. Or they could charge lower premiums to workers with lower wages" (Pear, 5/23).

The Hill: Meanwhile, "[a] study by the National Center for Policy Analysis shows that tax credits in the new healthcare law could negatively impact small-business hiring decisions." The new law provides a 50 percent tax credit to companies offering health coverage that have fewer than 10 workers who, on average, earn $25,000 a year. The tax credit is reduced as more employees are added to the payroll. The NCPA study finds the reduction in tax relief to be a cost concern for companies looking to hire additional workers, but operate on slim profit margin yet still provide employee health coverage."

"A Treasury spokesperson acknowledged the tax credit is on a sliding scale, but stressed its primary aim is to help struggling companies provide health coverage to workers" (Heflin, 5/23).