Why Don’t Businesses Just Reimburse Individual Plans?
I know that companies can be penalized for not providing insurance to their employees. I was wondering – why don’t large businesses just give their employees a subsidy so they can go to the Marketplace and buy their insurance — instead of going through all the trouble of selecting and negotiating for plan(s) and having to pay someone to administer the coverage? In other words — if a large business wanted to just, say, give every employee $10,000 per year to buy insurance through the marketplace, would the business still be required to pay a penalty for NOT providing insurance? It seems to me that if there were no penalty for doing something like this, there would be LOTS of large businesses that would be happy to get out of the business of dealing with insurance companies themselves. Thanks!
Employers can use health care arrangements like employee payment plans to reimburse health premiums and costs, but these can't be paired with non-group plans.
There is actually a giant nearly $40,000 per employee fee for reimbursing an employee for private non-group coverage. At first this seems silly, but the intention is to stop companies from skirting the employer mandate by encouraging employees to get federal health insurance subsidies (Premium Tax Credits and Cost Sharing Reduction subsidies).
If the above happened it would shift employer responsibilities onto the tax payer. This is why the fee exists. There are lots ways out of paying the fee, and small businesses are exempt, but the deterrent is in place.
All that being said, it would be nice if things were simplified for both employers and employees. Perhaps that is something we will see, but with half of America getting it's coverage through work transferring employer responsibility to the Marketplace overnight would be a disaster in regard to federal spending.