Healthcare Affordability Test Looms

About a third of U.S. companies could find themselves in violation of a provision of the recently enacted healthcare reform measure because some of their employees might not able to afford the health care coverage they provide, according to an analysis by human resources consultancy Mercer.

The Patient Protection and Affordable Care Act (PPACA) defines "affordable" health insurance as coverage that costs employees no more than 9.5% of their household income. Using data from its 2009 survey of nearly 3,000 employers that sponsor health plans, Mercer estimates that 38% of the companies have some employees for whom health coverage would be unaffordable. Bigger employers are in better shape, but not immune; 20% of companies with 20,000 or more employers would have a problem.

Those percentages probably overstate the extent of the problem, Mercer says, because its data includes only average employee salaries, not total household income. "What's troubling is it will be hard for employers to anticipate even whether it's a problem, because they're missing that piece of information about the household income," says Beth Umland, Mercer's director of research for health and benefits. "So they're doing more conservative estimates based on what they're paying the employee."

Starting in 2014, companies would face a fine of up to $3,000 per employee if workers can't afford company coverage and instead get government assistance to buy health insurance on an exchange.

Another potential problem spot for companies is health insurance for part-time employees. The law requires companies to offer coverage to all employees who average 30 hours a week or more during a month; Mercer's survey shows just 51% of large companies currently do so. Mercer also points to companies' use of limited benefit, or mini-med, insurance plans, which will run up against the new law's elimination of coverage limits. Seven percent of companies with 500 or more employees offer such plans, and 20% of employers with 20,000 employees or more.

"Employers with large part-time populations may be looking at the most serious strategic issues," Umland says. "If they haven't been offering coverage to part-timers they have to start, or make sure their part-timers don't work more than 30 hours in the week, which may not be convenient." She notes that companies that use many part-timers are more likely to offer mini-med policies and also more likely to have workers who can't afford the healthcare offered.

"Retailers are the ones who are really desperate to get the regulations so they can get their hands around it," Umland says, adding that although many parts of the healthcare reform measure don't go into effect until 2014, "if what you're looking at is a major change in your benefit program or your workforce strategy, 2014 will come very quickly." If companies do end up making such changes, they would prefer to phase them in over time, Umland says. "To do it all on Jan. 1, 2014, could be a little bit of a shock."

For more about the healthcare reform mandate on coverage of adult children, see Under 26 Coverage?

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