Calculating Incentives

The question for most employers is this: Should I discontinue benefits and send employees to the Health Insurance Marketplace, or should I continue to offer health insurance as a benefit for employees?
Below is a calculation that helps you estimate the result of discontinuing coverage and sending your employees to the Health Insurance Marketplace.
Calculating Incentives chart
Step 1: Estimate your annual premiums
  • This is a positive number, as it reflects a savings to your business should you discontinue employer-sponsored health coverage.
Step 2: Subtract the sum of the make-whole payments
  • Make-whole payments are salary adjustments you would need to make in order to send your employees to the Health Insurance Marketplace and continue to offer the same overall level of benefits as with an employer-sponsored health plan.
  • Make-whole payments are based on the estimated cost of a Silver plan.
Step 3: Add payroll tax adjustment
  • Payroll taxes will increase due to the salary adjustments related to make-whole payments.
Step 4: Add the difference in your corporate tax deduction
  • Employers that discontinue health coverage lose a portion of federal tax deductions since they no longer pay employee premiums.
Step 5: Add potential penalties
  • If you have 50+ FTEs and discontinue coverage, you will pay a penalty for each full-time employee, minus the first 30 employees.  
    • For example, if you have 75 FTEs and became subject to penalties, you would pay penalties on 45 employees.
Net Employer Incentive
The net calculation helps you determine the financial impact of dropping employer-sponsored coverage and sending employees to the Health Insurance Marketplace.

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