A friend of mine is the benefits manager for a small company (500 employees). He tells me as of 12/31 they will no longer offer health insurance. Why?
Well, currently they spend $4M/yr on health coverage for their employees. The employees kick in another 1.5M. By dropping coverage he pays the $1M penalty. But in return he can give each employee $350/mo towards their own coverage and still come out ahead. Some employees can get more even more if the company wants to keep them. The lower paid employees can qualify for gov't subsidies, which they couldnt before because the company offered a health plan. ANd between subsidies and employer contribution they can pick exactly the coverage they want, so better for them.
All in all it's a win win for employer and employee. But since this is a zero sum game the loser is of coure the taxpayer, who will be subsidizing all the lower paid employees who dont have coverage from their jobs.
This will of course drive up the cost of Obamacare astronomically.
Every company similiarly situated is doing exactly the same analysis and they will come to exactly the same concliusions: cheaper to kick employees off the plan and just pay them a little extra.
Figuring the $4 million spent on healthcare, is actually about $2.6 million net for the company, because tax code gave them a 35% tax break on the $4 million deduction.
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to pay each employee $350 a month X 12 Months X 500 employees is $2.1 million, but this would give you a business deduction so you would save 35% in taxes on that as well....so that could net out to $1,365,000....
plus another +/-10% for SS taxes and Medicare taxes on the $2.1 million gross salaries, (plus higher rate in UE fees for avg employee pay being higher...)so, add $210,000 to the $1,365,000, so we are at $1,575,000 for the employer....
PLUS the $1,000,000 in yearly tax assessment penalties, which is NOT tax deductible as a business expense.
soooo thats about $2.575 million a year....
THERE IS NO SAVINGS
to this company in your example
It is about the same amount of money for the owner to try to skirt the situation of paying for employee's health care insurance, WITHOUT giving the employee the benefit of having insurance, without the company's ability to recruit better employees by having the health insurance benefit...
It's a LOSE, LOSE for the employee and the employer...there is no way around that....
and sure, for those of the 500 that are getting paid piss poorly, the exchange could help them, but for most of the employees, in a company that is large enough to have 500 employees, are probably getting paid well enough to not get that much of a subsidy if any at all, and also more than likely, many employees could have a spouse that works and they would have to go on their spouse's plan, and not the exchange with subsidy help...and the spouse's employer is ONLY responsible for making the employee portion affordable, not a family plan...so their employees majorly get dicked with just the $350 gross, that is really $250 net....
And I would have to ask, why would any ETHICAL company, put their employee's health care expense on to the tax payers if it does not save them a dime to do such...if they are going to have to pay the $2.6 million net regardless with a plan like the one you mentioned above?
Makes no sense....
other than intentionally trying to bankrupt us as a Nation....and that is not a laughing matter....
Btw, the penalty for Romneycare was even less for employers in Massachusetts, so there was more incentive for the businesses to just drop it and let their employees get subsidized by the State, but guess what?
They didn't drop employee insurance, coverage actually increased for the number of employers carrying coverage for their employees....
so if a +/-$250 an employee penalty didn't make these businesses jump ship and save the money on health insurance benefits, then why would you think they would jump ship with a $2000 a head penalty?
