It’s difficult to meet everyone’s needs with just one group health coverage plan. Your health benefits package has to be affordable for variable-hour, minimum-wage workers; it also needs to satisfy higher-earning employees, like those on your executive team. Of course, it needs to meet the needs of everyone in between as well.
To sidestep the riddle, some employers offer different health plan tiers to employees at different wage brackets. For example, they might design a basic catastrophic plan that meets minimum essential coverage requirements, along with another, less expensive version. Meanwhile, on the upper end of the scale, they offer a full-featured plan that requires participants to absorb a higher percentage of the cost.
Such a strategy is practical for several reasons.
- It gives low-income workers a way to avoid the individual penalty by getting coverage, without requiring them to break the bank
- It gives employers a way to avoid the MEC penalty by fulfilling their obligation to offer a plan that meets the mandate for minimum essential coverage
- For workers who can afford more, it offers a more satisfying set of plan features while asking them to share some of the costs
Is a multi-tiered group health coverage strategy allowed?
Strategies like the one described above would, in theory, be limited by the Equal Coverage provision of the ACA. This provision was scheduled to have already taken effect; still the rules remain elusive. The IRS never issued guidance for the requirement. Therefore it’s made no plans to enforce it.
Consequently, employers are free to continue using this type of strategy for the time being – an option that may prove especially useful as the Employer Notice Program takes effect.
You may have some explaining to do
Have your workers received marketplace subsidies? Fair warning: over the next several months, you may receive a notice from the ACA Employer Notice Program. The program exists to give employers a chance to prove that they are, in fact, offering sufficient coverage, even if some workers are getting assistance.
If you receive such a notice, you’ll need to provide documentation that you’re offering minimum essential coverage and providing minimum value at an affordable cost. If you don’t, you can expect the IRS to come knocking after the following 90 days.
Does your business have a strategy to protect you from paying the MEC penalty? Does your strategy address all of the requirements which, if not met, will result in fines? Most importantly, does it bring meaningful benefits to everyone in your workforce, from your lowest-paid full-time employees to your highest-level executives?
Every health plan should be affordable for employees at every income bracket, increase overall participation, and build satisfaction across your workforce. A multi-tier strategy is one way to accomplish those goals.
If you could use a knowledgeable guide to help you navigate this new world of mandated benefits and penalties, contact us. At BeaconPath, we offer solutions tailored to specific business needs.
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