ACA mandates and regulations have you worried? Read this interesting article from our partner, United Benefit Advisors (UBA) by Danielle Capilla
Though employers are not required to educate employees about their individual responsibilities under the Patient Protection and Affordable Care Act (ACA), it is helpful to know about the individual mandate.
The individual responsibility requirement (also known as the individual mandate) became effective for most people as of January 1, 2014. Under the individual mandate, most people residing in the U.S. are required to have minimum essential coverage or they must pay a penalty. Many individuals will be eligible for financial assistance through premium tax credits (also known as premium subsidies) to help them purchase coverage if they buy coverage through the health insurance Marketplace (also known as the Exchange).
For 2014, the penalty for an adult was the greater of $95 or 1 percent of household income above the tax filing threshold. For 2015, the penalty was the greater of $325 or 2 percent of income above the tax filing threshold. For 2016, the penalty is the greater of $695 or 2.5 percent of income above the tax filing threshold.
The penalty for a child under age 18 is 50 percent of the adult penalty. The maximum penalty per family is three times the individual penalty. The penalty is calculated and paid as part of the employee’s federal income tax filing.
A person must have “minimum essential coverage” to avoid a penalty. Minimum essential coverage is basic medical coverage and may be provided through an employer, Medicare, Medicaid, CHIP, TRICARE, some VA programs, or an individual policy (through or outside the Marketplace). Acceptable employer coverage includes both insured and self-funded PPO, HMO, HDHP and fee-for-service plans, as well as grandfathered coverage, COBRA, retiree medical, and health reimbursement arrangements (HRAs). It does not matter whether the coverage is provided directly by the employer or through another party, such as a multiemployer plan, a collectively bargained plan, a PEO, or a staffing agency.
While most people must obtain coverage or pay penalties, individuals will not be penalized if they do not obtain coverage and:
- They do not have access to affordable coverage (cost exceeds 8 percent of modified adjusted gross household income)
- Their household income is below the tax filing threshold
- They meet hardship criteria (such as recent bankruptcy, homelessness, unreimbursed expenses from natural disasters)
- Their period without coverage is less than three consecutive months
- They live outside the U.S. long enough to qualify for the foreign earned income exclusion
- They reside in a U.S. territory for at least 183 days during the year
- They are a member of a Native American Tribe
- They belong to a religious group that objects to having insurance, including Medicare and Social Security, on religious grounds (for example, the Amish)
- They belong to a health sharing ministry that has been in existence since 1999
- They are incarcerated (unless awaiting trial or sentencing)
- They are illegal aliens
If the person has access to employer-provided coverage as either the employee or an eligible dependent, affordability of the employer-provided coverage is the only factor considered for purposes of the individual mandate.
- For the employee, coverage is unaffordable (so no penalty applies for failure to have coverage) if the cost of single coverage is more than 8 percent of household income.
- For a dependent, coverage is unaffordable (so no penalty applies for failure to have coverage) if the cost of the least expensive employer-provided dependent coverage is more than 8 percent of household income.
- If the employee and spouse both have access to coverage through their own employer, the cost for each person’s coverage is based on the cost of their own single coverage, but the totals are then combined to see if the total cost exceeds 8 percent of household income.
See the original article Here.
Capilla, D. (2016 November 9). Employer FYI: individual mandate requirements and proposed regulations [Web blog post]. Retrieved from address http://blog.ubabenefits.com/employer-fyi-individual-mandate-requirements-and-proposed-regulations