Darren D. Reynolds, JD
CEO and President
Since 2010, when the Patient Protection and Affordable Care Act became law, speculation has abounded, with experts and non-experts alike debating whether employers would drop group health coverage. As the employer shared responsibility penalties approach in 2015, employers must decide whether they will offer employer-sponsored health coverage that complies with the Affordable Care Act (ACA) or drop coverage and face various penalties and repercussions.
Although playing with the numbers is a basic approach to determining whether to keep or disband group coverage, the initial costs won’t tell the whole story. Disbanding group coverage, especially if you don’t increase employee wages, will be viewed as a reduction in compensation. This will likely have a negative impact on employee morale, possibly leading to lowered productivity and satisfaction. Eliminating group coverage will also cause you to forgo a powerful recruiting and retention tool. This could potentially increase your turnover rate and related costs, and possibly decrease your ability to attract top talent due to the lack of a valued benefit.
Your business runs on the quality of your employees—offering group health coverage indicates that you care about your employees, and it contributes to your employees’ morale. If you drop coverage, employees will suffer the inconvenience of having to find and obtain insurance elsewhere, whether through a spouse or parent’s plan or through the individual market.
The convenience and reduced cost of obtaining health insurance through an employer is a powerful and valuable benefit for most employees. When deciding to keep or drop your group health coverage, consider the value group coverage has as a retention and recruiting tool, helping you attract and keep the talented and motivated employees who contribute to the success of your company.
Ultimately, if you disband coverage, you benefit from reduced upfront health coverage costs, but are likely to end up paying significant amounts of money through penalties, increased wages and lost tax advantages. If you decide to keep group coverage, you and your employees will benefit from receiving various tax advantages, avoiding ACA penalties and ensuring higher employee satisfaction.