BY Arlene Weintraub
March 14, 2014 — On March 25, the U.S. Supreme Court will take up a case that has brought to light the potentially high costs of not complying with the Affordable Care Act, otherwise known as Obamacare. The case was originally filed by Hobby Lobby, an Oklahoma City company that contends it would be violating its owners’ religious beliefs if it obeys the law’s provisions requiring companies to cover birth control. But by not providing such coverage for the more than 13,000 employees eligible for its health plan, the company contends, it could face up to $475 million in fines per year.
That’s an eye-popping penalty—but not entirely unrealistic considering the choices Hobby Lobby must make about how it will handle health insurance under the law. Indeed, all companies with more than 50 full-time employees will face financial penalties of one sort or another if they don’t comply. Some of these fees are baked right into the law, while some were in existence before. Before you decide not to comply, it would be wise to get a handle on what it will cost you.
Let’s start with two fines that are spelled out in the Affordable Care Act. Any company with more than 50 full-timers that doesn’t offer any health plan at all will pay a $2,000 fine per employee per year, for all but 30 people. The penalty will be levied in 2015 for companies with more than 100 full-timers and 2016 for those with more than 50. Hobby Lobby estimates that if it chooses that option, it will pay $26 million a year. (The company declined to comment, instead referring to the legal briefs filed in the case.)
There will also be a $3,000 penalty for companies that do offer coverage, but whose plans are deemed “unaffordable” under the law. “They have to cover 60 percent of what’s known as the essential health benefits, of which there are ten,” explains Craig Garner, an attorney and health care consultant in Santa Monica, CA. Those services include emergency healthcare, preventive physicals, and prescription drugs. “If they don’t cover those the employees can get a credit.”
But what Hobby Lobby is most concerned about is a separate fine that went into effect as of the 2012 plan year, which stipulates that health plans must cover contraceptives. That was among a string of health regulations passed prior to the Affordable Care Act that now carry fines for non-compliance. “We’ve had these mandates for a long time, and failing to comply generally results in a fine of $100 a day for each person who is eligible for that plan,” says Andrea Powers, a lawyer with Baker Donelson in Birmingham, AL.
That $100 per day would total $475 million a year, according to Hobby Lobby’s court filings. The company says it’s opposed to covering four contraceptives, including the so-called morning-after pill, because of its founders’ Christian beliefs. Problem is, under current U.S. law, the only companies that can avoid the fee are religious organizations such as churches.