A loophole touted as a way for employers to wiggle out of the Affordable Care Act’s insurance mandate has been closed. What happened?
Officials got wind that some employers planned to bypass the mandate by giving their workers bonuses, asking them to decline company-sponsored insurance and sending them to the Obamacare marketplaces to buy subsidized policies. Nudging sick workers, in particular, onto the exchanges could save employers’ health plans money and shift the cost onto publicly subsidized plans. The Labor Department published new guidelines in November to explicitly forbid that practice.
Why did employers think they could get out of a federal mandate?
“Brokers were running around selling this idea that employers could give everybody a raise and say, ‘Go, get the tax credit, knock yourselves out,’ and they wouldn’t pay a penalty. Go figure—the IRS got wise to that,” says Keith McMurdy, a partner in the employee benefit division at Fox Rothschild, a law firm in New York City.