Affordable Care Act

Employers are permitted two safe harbors under the ACA in order to avoid fines and penalties.  Both involves the government’s idea of affordability (at the household level in real life, well, that’s another story).  First, an employee’s cost for single coverage ONLY must not exceed 9.5% of the employee’s income.  Secondly, the employer must offer a plan with a minimum of 60% actuarial value (Bronze Plan in “metal level” talk).

Calculating 9.5% of wages per employee is a spreadsheet exercise (coming up with a contribution strategy that won’t rile the employees is a different challenge).  But how does one conduct an actuarial analysis of plan design to determine its appropriate metal level?

There are a couple of solutions available to you.  First, if you have a fully insured plan, your insurer will do this for you.  If you have a self-insured plan, your Administrator may do this.

Milliman, the much respected insurance auditing firm has put together an extremely extensive (and costly) calculator that is highly regarded.  HHS has also made a calculator publicly available.  The early word is that the HHS calculator comes out with results about 8% more favorable results (to the employer) on average as compared to the Milliman calculator.  Guess which one I believe?

Here is an article by Kurt Anderson and Brian Pinheiro at Ballard Spahr that gets into the necessary nuts and bolts.