Mercer | Living with Health Reform

Mercer | Living with Health Reform

Few employers to face ACA’s “play or pay” penalties, but many still feel the pain

  • April 13, 2016
  • United States, New York

Employers have made their opinion about the excise tax clear. There is another Affordable Care Act (ACA) provision, however, that irks them nearly as much, and that is the “play or pay” rule – the mandate to offer coverage that meets ACA requirements or pay a penalty. In a recent survey of 644 employers, Mercer asked employers what changes they would like to see made to the ACA. Repealing the excise tax was first, with 85% in favor, but repealing the employer mandate was second, favored by 70% (see Figure 1). 

“It’s not because they don’t want to offer coverage. It’s because proving that they offer coverage is so much work,” said Tracy Watts, Mercer’s leader for health reform. 

The deadline for reporting to the IRS about coverage in 2015 was extended from March to June, and at this point most employers have a handle on their results. Virtually none of the survey respondents believe they will be liable for the “a” assessment – meaning they all offered coverage to substantially all employees working 30 or more hours per week. And just 8% thought they might be at risk for the “b” assessment – meaning that some of their employees might qualify - and obtain - subsidized coverage on the exchange because their employer’s plan did not offer affordable contributions or meet minimum plan value requirements. 

“This suggests that penalties are not going to amount to a huge source of revenue,” said Beth Umland, Mercer’s research director for health and benefits. The CBO had estimated that employer penalties would raise $9 billion in revenue in 2016.[1] 

Has the employer mandate resulted in more workers gaining coverage in employer plans?  About three-fourths of survey respondents say that their enrollment levels have not changed due to the ACA. While 22% have seen an increase in enrollment, most say the increase was slight (less than 5%), and 4% of respondents say enrollment has decreased (see Figure 2). The most recent CBO study reports virtually no change in the number of people obtaining health insurance from their employer since the law was passed. In 2016, 155 million people, or 57% of the population under age 65, will receive employment-based coverage. [2] 

When asked about the impact of the ACA on their organization, 20% of survey respondents say they have experienced higher cost and 29% say they have made unwanted plan design changes to avoid excise tax exposure. At the same time, 84% say that the additional administrative burden has had a significant impact – and 51% describe it as “very significant.” 

In addition, the requirement to offer coverage to “substantially all” employees working 30 or more hours per week will get harder to meet in 2016 when the definition of “substantially all” increases from 70% to 95%. Limited duration employees, like long-term temps and interns, could trigger an assessment. About one in four respondents say they will pull back on use of these workers, and another 16% are considering it. 

“More than half of Americans already get their health insurance from their employer, and three out of four workers are satisfied with their health benefits,” said Ms. Watts. “Under play or pay, employers have had to modify their plans, track worker hours, manage eligibility and report coverage to prove they are doing something they have been doing all along.” 

About Mercer

Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries.  Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit Follow Mercer on Twitter @Mercer

Figure 1: Employer “Wish List” for Changes to Elements of the ACA


Source: Mercer Survey, Living with Health Reform, 2016 

Figure 2: Majority had no change in enrollment due to the ACA, but almost one-fourth saw an increase


Source: Mercer Survey, Living with Health Reform, 2016




[1] Congressional Budget Office, Budgetary and Economic Effects of Repealing the Affordable Care Act (June 2015). 



[2] Congressional Budget Office, Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026 (March 2016).