Play or Pay: Points to Ponder for Companies on the Bubble

Small businesses that don’t employ anywhere near the numbers of staff that define an employer as “large” according to the “play or pay” provisions have little to fear from the impending penalties under the Patient Protection and Affordable Care Act of 2010. On the flip side, businesses that are clearly big to begin with more than likely already know they may be subject to the penalties and are taking steps accordingly.

Companies that may be on the bubble of large-employer status, however, have some additional points to ponder. For example, if you have just enough employees to be defined as a “large employer” yet you don’t (or can’t afford to) provide coverage that’s of minimum value and affordable, you could reduce the size of your workforce. Independent contractors, interns or seasonal workers could enable you to pick up the production slack.

Of course, laying off employees has many downsides — bad press, decreased productivity, diminished morale. So you may need to perform a careful, point-by-point comparison of enhancing your health care coverage vs. paying the health care act’s penalties. One factor that could sway your decision: Many of the costs associated with providing health care coverage are tax deductible; the penalties are not.