Front-Office Insider: The cost of losing Chris Bosh

Chris Bosh is owed $75.8 million. (Getty)
Chris Bosh is owed $75.8 million. (Getty)

With The Vertical’s report Friday that Miami increasingly believes Chris Bosh’s Heat career is over, Front-Office Insider Bobby Marks takes an in-depth look at the potential short- and long-term salary-cap ramifications for the Heat.

The contract
Chris Bosh is currently owed $23.7 million, $25.3 million and $26.8 million over the next three seasons.

The short term
If Heat team doctors determine Bosh can’t play, Miami would be eligible to apply for the Disabled Player Exception (DPE). However, if Miami does apply for the exception, the franchise would be ineligible to apply for the removal of Bosh’s salary in February.

Once an NBA designated physician consents that Bosh will miss the regular season, the Heat would be granted a $5.6 million exception that can be used up until March 10.

The Heat can use this exception to sign a free agent to a one-year contract, or acquire either through a trade or waiver claim a player with one-season left on his contract.

Unlike last season when Miami was over the luxury tax for most of the season, the Heat currently are $8 million below, a figure that will likely increase once the roster is set before the regular season.

However, because Miami has 15 guaranteed contracts, including Bosh, the Heat would need to clear a roster spot (likely once Bosh is waived).

The steps to remove salary
If the Heat and their team of doctors determine Bosh has a career-ending injury, Miami would take the following steps to remove his salary if the team didn’t utilize the DPE: the Heat would waive Bosh, and on Feb. 9, 2017, apply to have his salary excluded because league rules stipulate that a team must wait one year from the date of the player’s last game.

The determination on whether Bosh has suffered a career-ending illness will be made by a physician designated by the NBA and the players association and will not occur until Bosh has been waived and Miami applies to have the salary removed.

Hiatus but player returns
If Bosh eventually returns from his career-threatening injury, the salary will be included back on the Heat’s salary cap. There is, however, a grace period of 25 games after the player returns to determine if he’s healthy enough to continue.

For example, if Bosh is medically cleared to play in 2018-19, the Heat will not incur cap charges until he plays 25 games.

A comparable case
The Nets’ Jayson Williams suffered a career-ending injury in April 1999. Williams had signed a six-year, $90 million contract with New Jersey three months before the injury.

Although the injury to Williams ended his career, the Nets did not receive cap relief until the 2001-02 season because Williams sat out the 1999-2000 season but attempted a comeback the following year.

Because Williams tried to return, the Nets could not start the clock to exclude his salary. Williams retired in June 2000 and his salary was excluded the following year.

The financial implications for Bosh
Bosh, who is currently owed $75.8 million by the Heat, will receive the full amount of what is left on his contract.

However, the Heat could catch a break on what portion they will owe Bosh.

Bosh is currently under the league-wide Temporary Total Disability program that protects the Heat from any long-term injury. Each team must protect its five largest contracts.

Because Bosh’s illness occurred in February 2015 and 2016 after he signed his contract in July 2014, there are likely no medical exclusions based on his prior injury history.

For example, if Bosh had broken his right foot before signing his contract, the insurance company would have added an exclusion for Bosh’s right foot.

The exclusion protects the insurance company from any previous injury that could impact the current contract.

Had the illness to Bosh occurred prior to him signing his contract, the insurance company would have put an exclusion on his condition and the Heat would be on the hook for all compensation.

Once Bosh misses 41 games (he missed 29 in 2016-17) insurance will reimburse the Heat 80 percent of the guaranteed amount owed to Bosh, or up to a maximum of $175,000 per game, with the Heat responsible for the balance.

What the insurance company and Miami would each be responsible for:
Year Insurance Miami
2016-17 $12.25 million $11.5 million
2017-18 $14.35 million $10.9 million
2018-19 $14.35 million $12.5 million
Total $40.95 million $34.9 million

The impact on the salary cap
If Bosh’s $23.7 million salary is removed in early February, the Heat – barring any transactions – would likely fall $16 million below the salary cap.

Miami would then have the cap flexibility to either acquire at the trade deadline a short-term rental, or a player or players that could have an impact on the postseason.

Going below the cap would mean Miami would fall under the salary cap floor.

If Miami does not reach the floor – $84.7 million minus current salaries – there would be a penalty that would be distributed equally to their current players at the end of the season.

The summer of 2017, however, is when Miami could feel the biggest impact from the removal of Bosh’s salary.

The Heat, projected to have $17 million in room before the Bosh situation, would see that total grow to $43 million in room (based on a $102 million cap).

That room could increase based on the player options of Josh McRoberts ($6 million), Dion Waiters ($3 million) and Willie Reed ($1.1 million).

With Dwyane Wade in Chicago and Bosh’s future uncertain, plus multiple first-round picks to Phoenix – protected Nos. 1-8 in 2018, unprotected in 2019 and unprotected in 2021 – from the Goran Dragic trade, Miami’s hopes of retooling could hinge on next summer.

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