In June, giant consulting firm McKinsey & Co. released a report declaring 30 percent of employers are likely todrop their health coverage in 2014 as a result of health carereform. After receiving backlash, McKinsey quickly stated that thesurvey was not meant as a predictive economic analysis but ratheras a measure of current employer attitudes.

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In other words, they tried to capture the emotional state ofemployers a couple years before the employer and individualmandates go into effect. Of course, most employers won't end upmaking a knee-jerk emotional decision; instead, like most businessdecisions, it will come down to money. Before we do the math, it'simportant to point out that there is no requirement to offer healthinsurance to employees today, but a lot of employers find this tobe a good business decision. Why? Simple: Because employees wantbenefits.

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Many employees value their health coverage as much as they dotheir paychecks, so offering a comprehensive employee benefitspackage is a great recruitment and retention tool for employers.That won't change in 2014. On the contrary, more employees willappreciate their benefits at that time because their employer willbe helping them avoid the penalties they would pay if they chosenot to purchase health coverage.

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To quickly review the rules: Most Americans will be required topurchase health insurance coverage in 2014 or they will pay apenalty. Small employers with fewer than 50 employees are notrequired to offer health insurance at all – there is no penalty forfailing to do so. Large employers with 50 or more employees arerequired to offer coverage in 2014.

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If they don't, and if even one of their employees purchases asubsidized plan through the exchange, the employer will pay apenalty of $2,000 per year for each of their employees with thefirst 30 excluded. So what's the break-even point? This is whatemployers will need to determine when making the decision whetheror not to drop their coverage.

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Here's a quick example: ABC Company has 100 full-time employeesand the majority earn an excess of $9 per hour, or $1,560 permonth. To keep employees from automatically qualifying for asubsidized plan through the exchange, the employee portion of thepremium needs to be less than 9.8 percent of this amount, or $153per month.

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But the company doesn't want to lose money in the process, sothey need to determine what they would pay in penalties if theydidn't offer coverage at all. That amount is $140,000 ($2,000penalty x 70 employees), so spread out among the 100 employees, ABCcan contribute $140. Since most carriers require a minimumcontribution of 50 percent, and because some employees will waivecoverage, freeing up money for the others, we can ballpark this ata $300 monthly premium to be split 50/50 between the employer andthe employees.

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If the company can find a bronze-level plan – probably anHSA-compatible option – in this price range, they're actuallybetter off continuing to offer coverage, regardless of whatMcKinsey says. For premiums above this amount, it gets a littlemore complicated.

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The employer will need to factor in the tax-deductibility of thepremiums but not the penalty and try to determine how manyemployees would actually enroll in the health plan, how many wouldpay their portion of a subsidized plan, and how many will qualifyfor Medicaid now that it will be increased to 133 percent of thefederal poverty level.

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The math can get complicated, but the important point is thatthis is a financial, not an emotional decision, and brokers who areable to help their clients with this analysis will be in highdemand.

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Eric Johnson can be reached at 817-366-7536 or [email protected]

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