Articles | Cases

IRS proposed rules on wellness programs and Affordable Care Act disappoints employers

The decision process for employers of how to implement the provisions of the Patient Protection and Affordable Care Act got a little more complicated by a recent ruling from the IRS. Under the law, a health plan premium meets the affordability test if the premium paid by an employee for individual coverage does not exceed 9.5% of wages or household income. If an employer with 50 or more full-time employees fails to provide minimum coverage for even one full-time employee, and that employee gets a tax credit to buy insurance through a public insurance exchange, it will be assessed a $3,000 penalty. The attached "cheat sheet," prepared by Ottawa Kent, an outsource risk management advisor in Michigan and member of the Institute of WorkComp Professionals, is a helpful guide.

While businesses and non-profits felt it made sense to include wellness program discounts as part of the affordable coverage they must provide workers, under the IRS proposed rules the only discounts that would be allowed are those related to tobacco-cessation programs. To illustrate, if employers charge employees $150 a month for single coverage if they participate in a wellness program and $200 a month if they do not, then the $200 premium would be used in the affordability test. However, if the $50 discount applied to a tobacco-cessation program, then the lower premium of $150 would be used.