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Employer Mandate and How Penalties Work

ACA News: Learn more about how employer mandate and how penalties work.

What is the employer mandate?
For 2015, large companies with 50 or more employees had to offer minimum value, affordable health care coverage to their full-time employees or face a penalty. They also may have to pay a penalty if any of their employees get government aid to lower their health coverage costs. This penalty is essentially a non-deductible, extra tax.

Midsize businesses with 50-100 employees were allowed to delay this mandate until 2016, if they met certain conditions for transition relief. Beginning January 1, 2016, but by the first day of the 2016 plan year, all midsize employers with 50-100 full-time employees and equivalents (FTEs) must have a health care plan option in place that meets minimum essential coverage for 95 percent of their employees. That’s the requirement given by the Affordable Care Act (ACA). Employers who fail to prepare properly will face penalties.

What is minimum essential coverage?
The health care plan an employer offers must be considered minimum essential coverage. Stated briefly, this means that it must:

  • Supply minimum value by covering at least 60% of the total cost of benefits.
  • Be affordable. The premium for covering the employee must be less than 9.5% of the employee’s income.

How do employers calculate the number of employees?
Calculating the number of employees can be complicated. Employers should speak with their attorney or tax adviser for help. But here are the basic steps:

  1. Count the employees who worked at least 30 hours per week each month (including seasonal employees) in the prior calendar year.
  2. Count the employees considered full-time by adding the number of hours worked by all part-time employees (as well as seasonal) and dividing by 120.
  3. Add the monthly totals of steps 1 and 2 and divide by 12.

If the result is less than 50, the employer doesn’t have to offer health coverage.

What are the penalties?
There are different kinds of penalties, based on what part of the rule the employer didn’t follow. Employers have to pay a penalty for:

  • Not offering health coverage to full-time employees and their dependent children to age 26, and if any full-time employee gets government aid to lower the cost of coverage. The annual penalty is $2,000 x the number of full-time employees, minus the first 30 employees.
  • Offering health coverage for only part of the year. The penalty is based on the number of full-time employees and the number of months coverage was not offered.
  • Offering health coverage to 95% of full-time employees but one or more full-time employees gets government aid to lower the cost of their coverage because the coverage is not considered affordable. The annual penalty is $3,000 per employee getting government aid.

The U.S. Chamber of Commerce has developed this penalty calculator to help determine whether companies must offer coverage and what the penalty might be based on the number of full-time employees.

For more information about the employer mandate and penalties, see this fact sheet with frequently asked questions on ourhealth care reform website.

Read the full report here.

Contact Steven G. Cosby, MHSA, Group Health Insurance Broker and Agent with Cosby Insurance Group, with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

Cosby Insurance Group Warrenton Health Insurance Broker and Agent

Agencies Issue Proposed Rule Amending Summary of Benefits and Coverage Requirements and Revising Templates, Instructions, and Uniform Glossary

On December 30, 2014, the Departments of Health and Human Services, Labor and Treasury (the “Agencies”) jointly published a proposed rule amending the current Summary of Benefits and Coverage (“SBC”) regulation. 79 Fed. Reg. 78578. At the same time, the Agencies revised the SBC template; the sample completed SBC; the instructions for
completing the SBC applicable to group coverage and to individual coverage; the “Why This Matters” language template; the Coverage Examples; and the Uniform Glossary.

Comments are requested by March 2, 2015 on the proposed rule and the revised documents.

What Actions You Should Take

Group health plans and health insurance issuers should carefully review the proposed modifications to the SBC to determine how those modifications will change the plan or issuer’s compliance efforts. Note, particularly, that the Agencies propose to require plans and issuers to use these new templates for this fall’s open enrollment. As with the previous final SBC rule, given the complexity of the rule, and the potential for civil penalties, it is
important that plan sponsors and health insurance issuers to carefully evaluate the time and resources necessary to comply with the rule.

Comments are due March 2, so there is still time to share any thoughts or concerns you have with the proposed rule with the Agencies.

I. Background

The Patient Protection and Affordable Care Act (“ACA”) added section 2715 to the Public Health Service Act (“PHSA”) which requires group health plans and health plan issuers to compile and provide an SBC that “accurately describes the benefits and coverage under the applicable plan and coverage.”
The SBC requirement applies to insured and self-funded ERISA group health plans, including grandfathered plans, as well as to non-ERISA group health plans and individual health insurance coverage.

The SBC must follow a uniform format which includes a series of content requirements such as: uniform standard
definitions of medical and health coverage terms; a description of the coverage including the cost sharing
requirements (i.e. deductibles, coinsurance, and copayments); and information regarding any exceptions, reductions,
or limitations under the coverage. On August 22, 2011, the Agencies issued proposed regulations on 76 Fed. Reg.
52442 (Aug. 22, 2011); 76 Fed. Reg. 52475 (Aug. 22, 2011). The final regulations were published in the Federal
Register on February 14, 2012 and were effective on April 16, 2012. A summary of those final regulations is available at http://www.groom.com/resources-653.html.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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ACA Tax Warnings Issued Days Before Coverage Deadline

With days left to sign up, the Obama administration began to spotlight the penalty some Americans could pay for failing to get health insurance under Obamacare this year.

Typically, the administration focuses on the benefits of coverage without resorting to more serious, pocketbook messaging.

But the latest email blasts to customers with HealthCare.gov accounts warn users to “get covered or risk paying a fee.”

The hit will come in two forms, the notice says: paying out of pocket for regular and unexpected medical expanses, and the tax penalty nonexempt people must pay under the Affordable Care Act’s individual mandate.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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President Obama Will Veto the 40 hours change to ACA

Obama Threatens Veto of Increase of Hours in Health Care Law

The White House says President Barack Obama will veto legislation that would increase his health care law’s definition of a full-time worker from 30 to 40 hours per week.

Republicans say the health law’s 30-hour requirement is encouraging companies to cut workers’ hours. The White House said in statement Wednesday there is no evidence the law has caused a broad shift to part-time work.

The House plans to debate the measure this week as one of its first orders of business in the new Congress.

The White House argues the bill would reduce the number of Americans with employer-based health insurance coverage and create incentives for employers to shift employees to part-time work. The White House says the bill would also increase the deficit by $45.7 billion over 10 years.

Source: http://abcnews.go.com/Politics/wireStory/obama-threatens-veto-increase-hours-health-care-law-28058327

First Quarter Health Spending Surge Attributed To ACA

The Bureau of Economic Analysis released new figures Share to FacebookShare to Twitter Wednesday, revealing that the American economy grew just 0.1 percent in the first quarter of 2014. In analysis of this news, several outlets point out that spending in the healthcare industry, however, has skyrocketed since the beginning of the year.

        Indeed, Reuters Share to FacebookShare to Twitter (5/1, Mutikani) says that health spending growth, which shot up by a 9.9 percent annual rate, actually prevented the country’s GDP from contracting in the first three months of the year. The article, like many others, attributes this growth rate –the fastest in over thirty years – to insurance gains under the Affordable Care Act.

        As Bloomberg News Share to FacebookShare to Twitter (5/1, Wayne) says, the increase in spending growth suggests “Americans are using the insurance they gained” under the Affordable Care Act. Indeed, there were increases in elective surgeries and “prescriptions for costly medications,” and overall health spending contributed 1.1% toward total GDP growth, “the most since quarterly records began in 1947.”

        The Wall Street Journal Share to FacebookShare to Twitter (5/1, Sparshott, Morath) adds that Jason Furman, chairman of the White House’s Council of Economic Advisers, applauded the news, saying, “People who didn’t have insurance before can now go to the hospital and the doctor. That’s good for the economy.” He also predicted that the ACA would continue to act as a “tailwind” to the economy for “the next year or two.”

        Still, the uptick in spending on healthcare alarmed many. As Philip Klein writes in the Washington Examiner Share to FacebookShare to Twitter (5/1), the acceleration comes after years of “Obama and his allies…crediting a slowdown in the rate of growth for health care to payment reforms imposed by the law.” Indeed, Obama argued for passage of the ACA in part because spending was heading toward a share of the economy that was “unsustainable.” Klein also notes that the economic figures reflect the cost of implementing the Affordable Care Act.

        Roll Call Share to FacebookShare to Twitter (5/1, Bettelheim, Subscription Publication) reports that Furman, seeking to temper this type of negative reaction to the uptick in health spending, said, “The sharp increase in estimated utilization appears to have been driven by greater use of health care services by people who gained insurance coverage during the first quarter because of the Affordable Care Act … this increase in utilization is neither a surprise, nor a cause for concern.”

        Similarly, under the headline, “Your Guide To The Latest Freakout Over Healthcare Spending,” the Huffington Post Share to FacebookShare to Twitter (5/1, Young) offers this assessment: “Who could have predicted that a recovering economy, higher incomes and a rise in the number of people with health coverage brought about by Obamacare would increase how much Americans are spending on medical care? Well, pretty much anyone.”