Health-care legislation creates a 'pay or play' environment.

• Author: Kozak, David
• Position: Private companies

A detailed reading of the Patient Protection and Affordable Care Act (PPACA) legislation yields an array of requirements, options and opportunities for private companies, which differ for each employer, depending upon the number and income levels of its employees.

Likewise, the penalties/excise taxes imposed upon noncomplying employers vary based upon the size of the employer, as does assistance in the form of tax credits.

Bottom line: The 2010 health-care legislation creates a "play-or-pay" environment and a different environment for each employer category--small, medium-small, medium and large.

Small employers are those that have 25 or fewer full-time employees with average annual wages per employee less than $50,000. Businesses are considered medium-small if they have 26 to 49 employees. Medium-sized businesses have 50 to 200 employees.

Businesses with more than 200 employees constitute large businesses. And commonly owned businesses are grouped as a single business for application of the legislation.

The requirements and opportunities identified by the legislation differ depending upon the category into which each business falls.

Small employers may be eligible for general business tax credits as additional incentive to provide health insurance. If a small employer pays at least half of its employees' premium amounts, tax credits may be available to offset tax on the income earned by the small business; a sort of carrot dangled before the small employer to reduce the costs of playing.

For those employers choosing not to play--defined as those who do not offer health insurance or do not offer to pay the legislated percentage of their employees' health insurance premiums--the legislation provides an alternative, a state exchange.

Each state must create an exchange through which various health insurers make coverage available in a pool that is set up and administered by the state. State exchanges will make health insurance available to those without coverage or provide a reduced means to pay for coverage.

These state exchanges add to the options available to employers. Should the employer pay for coverage for employees? Or, should the employer simply turn health insurance coverage over to the state exchange?

Employees whose employers do not offer health insurance, or whose employers pay less than the percentages of the premium costs specified in the legislation, may obtain coverage through a state exchange.

Low-income employees may be...