The new health care reform law offers companies with more than 50 full-time equivalent employees a choice: They can play by offering their employees affordable employer-sponsored health care, or they can pay a penalty not to.

It sounds straightforward, but making that decision involves complexities and factors that vary depending on the size of the company and the type of workforce. Since the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA) in June, many employers have been weighing their options and preparing for the consequences of paying or playing. Others are waiting to see the outcome of the Nov. 6 election because Republicans, should they gain control of both the White House and Congress, have pledged to repeal or at least overhaul the PPACA.

But time is running out. The so-called “employer mandate” takes effect Jan. 1, 2014, meaning employers who currently offer health care coverage but need to make changes in order to comply with the law, or who want to drop health care and pay a penalty instead, have just a few months to put those plans in place. The situation is even more critical for employers who currently do not provide health care benefits but will be required to do so, or face penalties, under the new law. For all, the decision goes beyond a simple cost analysis.

“The answer to whether it makes sense to pay or play is not something you can paint the answer to with a broad brush,” says Sheldon Blumling, a partner at Fisher & Phillips. “Most employers would say, 'If I pay $2,000 per employee in penalties and I am paying a lot more per employee for health care coverage, it looks like a no-brainer.' But the devil is in the details.”

On the following pages, InsideCounsel looks at some of those details that are driving employers' play-or-pay decisions.

Wait and See

Large employers traditionally have offered health care coverage, and most will continue to do so, at least in the short run. A General Accounting Office review of 19 employer surveys on the topic found the percentage of employers who said they planned to drop coverage ranged from 2 percent to 20 percent, with many studies indicating the smaller the employer, the greater the chance of abandoning coverage.

“That's not surprising because most large employers have never considered leaving their employees without health care coverage,” says Steven Friedman, a shareholder at Littler Mendelson. “Even if they are considering it, no one wants to be the first one. There may be a cat-and-mouse game going on, where employers in certain industries are waiting for the first company to drop coverage, or waiting for it to become commonplace.”

Patricia Cain, a partner at Neal, Gerber & Eisenberg, summarizes the factors that go into the play-or-pay decision as the three Cs: culture, cost and competitiveness.

The culture issue involves the employers' view of his responsibility to provide employee benefits. “For many, health care is a core benefit,” she says.

Part-time Redefined

The Patient Protection and Affordable Care Act's (PPACA) biggest impact will be on employers who traditionally have not offered health care to their workers, or who have offered mini-med plans with very limited benefits that don't qualify as minimum essential coverage under the new law.