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What Does Play or Pay Mean for Penalty or Premium?

What Does Play or Pay Mean for Penalty or Premium?

Office Cubicles

Office Cubicles Representing Large Employer

One of the provisions that was entered into the Patient Protection and Affordable Care Act is known as the Play or Pay provision. This provision only applies to larger companies and employers with more than 50 employees. What does this mean, exactly? Either the company has to provide health coverage to all of their employees or pay the penalties associated with not giving their employees the required and mandated coverage choice. A lot of companies feel that they will save more money by paying the penalty instead of the premium.

Two Things to Keep in Mind

  • The provisions were delayed from 2014 to 2015, a change made in July of 2013.
  • The provision is only applicable to those companies that have more than 50 employees, so smaller businesses are not impacted by this provision.

What Does This Mean?

When it comes to playing: The company must offer health insurance that meets the demands of the new act. This is usually affordable for employees who have to pay for the premium.

When it comes to paying: The company chooses not to offer the insurance and pay the tax instead, including any other applicable extras.

A Third Option

The company can allow employees to purchase their own plans through various means, and then they will reimburse them for costs associated with their premiums. This gives the employees more power when it comes to choosing a plan that meets their needs. A company is more likely to pay for this since it might save them 70 percent or more when it comes to health-insurance costs. The employees generally have rules and regulations that they have to follow and meet in order to qualify for company reimbursement. Even with the penalties that might be factored in, this option might be the best to go with overall.

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