Employer Excise Tax

• Employers offering “group health plans” may not impose annual or lifetime limits on the 10 essential health benefits and must provide wellness and preventative coverage.
• Employers that provide health coverage to their employees by paying all or part of the premium, pre-tax, for individual health insurance policies that the employees obtain on their own are considered “group health plans” under the ACA and therefore the employer must either offer ACA-compliant coverage as discussed above or pay an excise tax of $100 per day per employee or $36,500 per year per employee.
• This is applicable to employers providing this type of plan regardless of the number of employees.  Could be as low as 2 or up to 50.

 

The only way around the Excise Tax is if all of the following are true.

• No contributions are made by the employer or employee organization;
• Participation in the program is completely voluntary for the employees;
• The sole function of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employee, to collect premiums through payroll deductions (post-tax) or dues checkoffs and to remit them to the insurer; and
• The employer receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deduction or dues checkoffs.
• Employers may increase an employee’s wages in order to help cover health care costs, but may not condition the increase on the employee acquiring individual health coverage, the employee must have the discretion to spend the extra wages as they wish.

If promoted through the employer, the employer’s role must be limited to collection of premiums post tax through payroll deductions as an administrative convenience.