I Have 50+ Employees. Are Group Plans Our Only Health Insurance Option?

November 18, 2015

If you’re in charge of employee health insurance at your company, you’re probably spending a fair amount of time trying to figure out your obligations – specifically whether you’re in compliance with the ACA. As a quick summary, employers with 50 or more full-time equivalent (FTE)* employees must offer coverage that provides a minimum level of coverage to FTEs and their dependents or be subject to the Employer Shared Responsibility payments (sometimes called the “Pay or Play rules”).

There are two types of Shared Responsibility payments—one for failing to offer minimum essential coverage and the other for failure to provide minimum essential coverage that is affordable and provides minimum value. Read our blog post titled “Dissecting the ACA Employer Shared Responsibility Payments” for a more detailed breakdown of these payments.

What is a MEC plan and why should I offer it?

Gravie gives employers with 50 or more employees the option of offering a Minimum Essential Coverage (MEC) group plan – a plan that covers only preventative care services, like immunizations and health screenings. When the MEC plan is offered, whether or not any employees actually take that coverage instead of choosing a more inclusive plan from the individual market, you can eliminate or reduce the penalties you’re subject to. By offering Gravie and a MEC plan, employers give employees access to many coverage options in the individual health insurance market, too.

How does MEC reduce or eliminate penalties?

To start, thinking of these payments as “penalties” is a loaded term. If you shift your mindset of the Shared Responsibility fees from them being “penalties” to thinking them of them as “payments,” you can approach your options from a better place. It is up to you to choose to make these payments instead of offering traditional group coverage. The payment is simply a way to make sure you’re doing your part.

If you choose to “pay” instead of “play,” you can reduce these payments by offering a MEC plan in addition to Gravie. When you do this, you are offering minimum essential coverage and will not pay the $2,160** per employee fee that you would pay if you didn’t offer a MEC plan.

If any of your employees receive a government tax credit through the exchange, you will pay $3,240** for this employee and any others who get tax credits. This is because you aren’t offering minimum essential coverage that’s both affordable and offers minimum value.

Because you are still subject to the $3,240 penalty, Gravie can help you think through whether offering MEC and Gravie is right for your company. We do this by running a financial analysis and taking a look at how many of your employees are tax credit eligible. In many cases, the cost savings of the individual market outweigh the cost of paying the fee for any employees that receive a tax credit.

Who administers the MEC plan?

Not only does Gravie handle all the administration related to employees shopping for insurance in the individual market, we also administer the MEC plan.

The ACA can be confusing, so if you have any questions about your compliance when using Gravie we’re happy to answer them. Call us at 844.540.8701, fill out our employer form, or tweet us @gogravie.

*Applicable Large Employer (ALE)
** These amounts are estimates for 2016. The IRS has not yet released the official amount.

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