South Florida Hospital News
Monday October 26, 2020

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April 2013 - Volume 9 - Issue 10

Healthcare Organizations May be Subject to Health Reform’s “Play-or-Pay” Provisions

One of the main purposes of the Patient Protection and Affordable Care Act (the “ACA”) is to expand healthcare coverage for all citizens. Employer-sponsored health insurance is the main source of health insurance in the United States. As a result, the ACA targets employer-sponsored insurance in an effort to reach more uninsured citizens. The ACA’s goal is to have employers and the government “work together” to expand coverage. Thus, the ACA contains “play-or-pay” requirements that incentivize certain employers who offer affordable coverage for employees, and penalizes those who don’t offer. In addition, the ACA also requires, beginning in 2014, the creation of state-based “Exchanges,” through which individuals and small businesses can purchase coverage (1). These Exchanges will offer coverage without, among other things, any exclusion for pre-existing conditions.
The ACA’s “play-or-pay” requirements, which become effective January 1, 2014, require large employers (employers with 50 or more full time employees or “FTE”s) to offer “affordable” group health coverage to its FTEs or face the strong possibility that it will be assessed a penalty from the government. The penalties, depending on the circumstances and the number of employees, could be costly for the employer.
Unlike large employers, who must offer affordable coverage or be assessed a penalty, certain small businesses (for-profit or non-profit) who contribute to their employees’ health insurance are eligible for a tax credit for all years dating back to 2010. A small employer will be “eligible” for a tax credit if: a) it has less than 25 FTEs for the taxable year; b) the average annual wages of its FTEs for the year are $50,000 or less per FTE; and c) the small employer contributes a uniform percentage of at least 50% of the premiums for employee’s health insurance offered by the small employer. Beginning in 2014, the maximum tax credit a small business can receive is a) for for-profit employers, 50% of its contributions to its employees’ health insurance premiums; and b) for non-profit employers, 35% of its contributions to its employees’ health insurance.
Healthcare organizations, like other businesses, must be cognizant of these employer mandate provisions and whether they are applicable. The consequence for large employers is a possible assessment from the IRS, while the opportunity for small entities is an opportunity for a tax break.
Fred Segal is a member of the Broad and Cassel Health Law Practice Group. He is based in the Firm’s Miami office. He can be reached at (305) 373-9400 or
(1) Focus on Health Reform, Summary of Health Reform Law, Kaiser Family Foundation, April 2011, available at
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