PRACTICE NOTES: Are You Ready For "Pay Or Play" Under The Healthcare Act?

Beginning on Jan. 1, 2014, the Patient Protection and Affordable Care Act requires large employers, those maintaining a staff of at least 50 full-time or full-time equivalent employees, to offer comprehensive and affordable health care coverage to employees and their dependents or risk a penalty. Organizations with fewer than 50 such employees aren't subject to this requirement, which is commonly referred to as play or pay.

The Penalties

If your practice is a large employer and doesn't offer qualifying health coverage to its full-time employees, you might incur a substantial penalty. That is, if just one employee receives a premium tax credit for buying coverage from one of the newly established state- or federal-run health insurance exchanges, you'll have to pay a penalty of $167 per month, or $2,000 per year, for each full-time employee after the first 30.

Even if your practice offers health care coverage to its full-time employees, you might suffer a penalty if the coverage isn't deemed affordable or fails to provide sufficient value. In this case, if just one employee receives a premium tax credit for the purchase of coverage from an exchange, you'll have to pay a penalty of $250 per month or $3,000 per year for each full-time employee receiving the credit, or, if less, $167 per month, or $2,000 per year, for each full-time employee over the first 30.

Remember that, if your coverage doesn't qualify under the health care act affordability and sufficient value requirements, you may be able to use one of three safe harbors to avoid penalty. (Ask your financial or benefits advisor for details.)

Additional Points

Here are a couple of additional points to bear in mind:

1. You must state your position. As an employer, your physician practice must make an affirmative election to provide health insurance coverage and disclose that election to employees. Also, when filing your tax returns, you need to provide proof of coverage and document your contributions to covering the cost of the insurance.

2. Don't ignore part-timers. It may not seem like part-time employees are covered by the employer mandate. When determining large employer status, however, you'll need to factor part-timers and hourly staff into the calculation.

A Necessary Check-In

Many physician practices will be under the large employer threshold and, therefore, won't be at risk for play-or-pay penalties. But don't let that keep you from checking in with your financial and benefits advisors about whether and how the health care act might affect you.