Obamacare – Let’s Review

It is Still the Law of the Land

First thing to know, despite all of the noise and bluster from Washington, nothing has materially change regarding the Affordable Care Act.  It is still the law of the land with all of the mandates and penalties remaining firmly in place.

With that in mind and for purposes of review, here are the basics:

Groups Under 50 Eligible Employee

These sized groups are not affected by the employer mandate but must recognize that their employees are still subject to the Individual Mandate requirement for minimum essential coverage ($2,484 in 2015 for single coverage and $12,420 for a family of three or more children. The penalty is pro-rated for people who are uninsured for a portion of the year and waived for people who have a period without insurance of less than three months.

2017 = Tax Penalty will increase by the rate of inflation going forward | or 2.5% of your household income that is above the tax return filing threshold for your filing status (whichever is greater).

What is the Individual Mandate?

The penalty can be no more than the national average premium for a bronze plan (the minimum coverage available in the individual insurance market under the ACA), which was $2,484 in 2015 for single coverage and $12,420 for a family of three or more children. The penalty is pro-rated for people who are uninsured for a portion of the year and waived for people who have a period without insurance of less than three months.

2017 = Tax Penalty will increase by the rate of inflation going forward | or 2.5% of your household income that is above the tax return filing threshold for your filing status (whichever is greater).

Groups Over 51 Eligible Employees (Traditional Salaried Employees) Generally must offer a qualified Major Medical (Metallic) Plan (Bronze, Silver, Gold Etc..)

“A” Tax Penalty = $2,160 (IRC Section 4980H(a) is assessed per full-time employee, minus first 30 full-time employees for failure to offer at least Minimum Essential Coverage (MEC). The Tax Penalty is triggered once the first full-time employee qualifies for a subsidy. Failure to comply would result in a monthly tax penalty of $180 per full-time employee (minus 30 full-time employees, assuming at least one employee qualified for a subsidy).

*Some States, such as CA define Large Employers as those with 100 or more full-time equivalents.

Penalties are not a Tax Deductible Expense.

Groups Over 51 (Service Industries with More Than 75% Hourly Workers)

Service, Agricultural, Nursing, Hospitality, Convenience Stores, Manufacturing, Security and Retail

We strongly recommend groups like these (industries and work force descriptions above) consider a less traditional approach to compliance called MEC Plus. This is a compliant self-funded Affordable Care Act (ACA) Minimum Essential Coverage (MEC) plan, packaged with fully-insured Limited Benefit Indemnity Plan, which is a package within itself.

NOTE: ACA requires most health plans to cover a set of preventive services — like shots and screening tests — at no cost to the covered member. The goal is to “prevent” a serious health condition by detecting problems early on.

Minimum Value Penalty for Large Employers (*51 or more full-time equivalents) 2016 Tax Penalty(s):

What Is A Minimum Value Plan?

•       Fully insured – Generally referred to as metallic reference (Bronze Plan 60% value per the IRS financial calculator)

•       Self-Funded – Can have the same or similar design as a fully insured bronze plan still meeting the IRS Financial Calculator threshold of 60%. Includes no annual limits.

•       Self-Funded – Hybrid Minimum Value plan. A plan designed around what some think/assume meets Minimum Value per final regulation on self-funded plans meeting “Substantial Hospitalization”.

Benefits or Risks for Offering a Minimum Value Plan (Limited Self-Insured)?

•       Compliance, these type of plans were addressed in November of 2015, with final regulations stating the plan must have “Substantial Hospitalization”. Some plans assume that means 2-5 days in the hospital meets the definition of “Substantial”. Very risky as HHS/IRS has never defined substantial and without the definition the employer/insurer (employer is the insurer), leave themselves open to scrutiny, audits and fines. The TPA and the reinsurer are not at risk the insurer/employer is.

•       These plans are sold as “No one will enroll”, yes they are unattractive with the limits on hospital and other high cost benefits, but…. By offering this plan the employer is forcing the employee to take this plan as they will not be eligible for the market place. This guarantees you will receive only the highest Risk.

More About the “B” Tax Penalty = $3,240 (IRC Section 4980(b), is assessed ONLY when an employer fails or elects not to offer an affordable MV plan (no more than 9.66% of the employee’s W2 wages) to at least 95% of its full-time employees and an uninsured full-time employee seeks coverage on the Marketplace and receives a subsidy. This tax penalty is assessed at $270 for each month the individual is employed and is receiving the subsidy.  If they are covered on their employer sponsored health plan, they would not qualify for a subsidy, even if they could obtain better coverage at a lower cost on the Marketplace. 

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