Tag Archive for: affordable care act

The Individual Mandate: What Employers Need to Know

The California Individual Mandate, originally signed into law in 2019, was a response to the federal individual mandate being struck down by the Trump administration.

 

This state law requires all California residents to obtain Minimum Essential Coverage (MEC) for a minimum of nine months, or they may face a tax penalty unless exempt.

 

Let’s discuss the individual mandate and what employers need to know, starting with a shorthand list of exemptions.

MEC Exemptions

According to the State of California Franchise Tax Board, some exemptions include:

 

  • An individual’sincome is below the state tax filing threshold
  • A coverage gap consists of three consecutive months or less
  • Coverage is not affordable based on the income reporting in your state income tax return
  • If the cost of the lowest plan, whether marketplace or employer-sponsored, is more than 8.09% of income on an individual’s tax return
  • The cost of the lowest employer-sponsored family plan, including dependents, is more than 8.09% of the household income
  • Non-citizens who are not lawfully present in the state
  • Those who are living abroad or are residents of another state
  • Members of a health care sharing ministry
  • Enrolled in limited or restricted-scope Medi-Cal or other similar coverage
  • Those in federally recognized tribes are eligible for services through an Indian health care provider or the Indian Health Service
  • Those in jail, except for incarceration, pending the disposition of charges

 

These exemptions typically must be claimed on your state income tax return.

 

While the individual mandate went into effect “to reduce the number of uninsured individuals and families,” it also has implications for employers in California. Moreover, the law requires additional reporting from specific organizations.

Employer Reporting Required by the Individual Mandate

Employers must report insurance information to the Franchise Tax Board (FTB) of California by March 31. The data reported includes the enrollment participation of employees and their dependents.

 

Employers with an insurance provider who reports to the FTB are not required to report in addition to their provider.

What are the Penalties for Not Reporting Insurance Information to the FTB?

Employers who do not meet the filing deadlines of the FTB are subject to a $50 penalty for every employee receiving coverage.

 

Individually, there is a flat penalty per household member or 2.5% of the gross household income, whichever is higher. If an individual does not obtain coverage for the entire year, they would be subject to a minimum fine of $800. 

Why Are There ACA Reporting Requirements for Employers?

For applicable large employers (ALE), the FTB introduced these reporting requirements to help enforce the state’s healthcare mandate.

 

Employers who offer self-insured or employer-sponsored plans must report individual enrollment through Form 3895C unless their insurer reports via Form 1095-B. 

 

These reports allow the FTB to verify an individual’s coverage and identify who must pay an individual shared responsibility provision (ISRP).

 

This sounds like a lot, but don’t worry. At SBMA, we take care of all ACA reporting required for the ALEs we work with. We submit Forms 1095-B and 1095-C to ensure you comply with ACA requirements.

Individual Mandates in Other States

Individual mandates are becoming a more common practice in states other than California. The current states who have individual healthcare mandates include:

 

  • California
  • The District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island, and
  • Vermont

 

Read this article “What are the Advantages of the Affordable Care Act?” to learn more.

A Final Word

As an employer, it is essential to understand the individual mandate to ensure you remain compliant with reporting requirements and avoid hefty fines.

The best way to stay on top of these requirements is to partner with an insurance provider who handles your reporting. Learn more about benefit plans, here.

,

Understanding the Affordable Care Act Individual Mandate

The Affordable Care Act (ACA) implemented an individual mandate, also known as the “individual shared responsibility provision” that requires that most Americans have qualifying insurance.

 

Read more about what Minor Medical is and what it covers here.

 

Until 2018, those who did not prove themselves to have health insurance when filing taxes were penalized. The Tax Cuts and Jobs Act of 2017 eliminated that requirement. Now, however, the financial penalty is repealed, but Americans are still required to have health insurance. 

 

In order to stabilize the healthcare marketplaces, some states took it upon themselves to create state-wide individual mandates. This helps balance the marketplace because when healthy individuals have health insurance, it spreads the cost of care so those with chronic conditions do not end up paying as much. 

 

States with Individual Mandates 

Not all 50 states have individual mandates. 

 

Only the following states participate:

 

  • California 
  • The District of Columbia 
  • Massachusetts
  • New Jersey 
  • Vermont 
  • Rhode Island 

 

There are benefits and drawbacks to state individual mandates. According to the ACA Times, “These states’ individual mandates have resulted in greater healthcare participation but have also created challenges for employers and their ACA compliance efforts.”

 

For example, in 2022, a record number of people (over 15 million people) enrolled in health insurance coverage. 

States Considering Implementing Individual Mandates 

The states mentioned above with individual mandates may increase in number.  A handful more states are considering implementing their own state-wide individual mandates. 

 

Those states include:

 

  • Hawaii
  • Connecticut
  • Minnesota
  • Washington
  • Maryland 

 

Are There Financial Penalties in States with Individual Mandates?

In short, yes. The states with individual mandates do impose financial penalties to those without health insurance despite the Tax Cuts and Jobs Act of 2017. 

 

California 

California residents are required to have health insurance or provide an exemption to health insurance. In 2021, the penalty for not having health insurance is:

 

  • A flat fee of $800 per adult and $400 per child 
  • 2.5% of gross income that exceeds the household’s state filing threshold

 

District of Columbia

In the District of Columbia, residents must have health insurance or face a penalty of the following:

 

  • 2.5% of family income over the federal tax filing threshold
  • $695 per adult and $347.50 per child under 18, with a cap of $2,085 per family

 

Massachusetts 

Massachusetts residents are only penalized if they are over 18 years of age and do not have health insurance. Exceptions include those who make less than 150% of the federal poverty level. Their penalty for not having health insurance is based on a sliding scale that ranges from $276 to $1,704. 

 

New Jersey 

Residents of New Jersey are penalized for not having health insurance based on the number of months uninsured. The penalty can range from $695 to $3,492

Vermont  

Residents of Vermont do not have a financial penalty if they do not have health insurance. They do, however, have to indicate if they have insurance or not when filing taxes. 

 

Rhode Island 

Residents of Rhode Island must pay the following penalty if they do not have health insurance:

 

  • 2.5% of annual household income
  • $695 per adult and $347.50 per child under 18

 

Complications of the Individual Mandate

The individual mandate makes it more difficult for companies providing health insurance to keep up with state-by-state regulation and reporting requirements. For example, employers with an employee in Massachusetts must make sure that the company complies with state and federal regulations. 

 

Companies providing health insurance to employees in states that have individual mandates must make sure they comply with federal and state regulations in order to avoid penalties or fines.  

For more information on maintaining ACA compliance, read our article on 1094/1095 Compliance: What You Need To Know.

, ,

What Are the Advantages of the Affordable Care Act?

In 2010, The Affordable Care Act (ACA), aka Obamacare, was enacted to provide reform to the health insurance industry.

Overall, the Affordable Care Act aimed to accomplish 3 main strategies: make insurance affordable, emphasize prevention, and improve how health care is delivered.

Over a decade later, it’s challenging to ignore the new standards that were derived from the original push to pass this legislation. While the act originally caused disagreements nationwide, there are clear advantages to be noted that have resulted from ACA.

Make Insurance Affordable 

The first of the strategies that Obamacare aimed to accomplish was to make health insurance affordable for all Americans.

Oftentimes many assume that they have a clear understanding of the finances of their insurance coverage. However, after landing in the hospital or experiencing a need for emergent care, they would find themselves slapped with high deductibles, unexpected bills, and low maximum coverage. ACA was responsible for making changes to such events.

ACA was able to lower insurance costs for Americans in a variety of ways. The first of which was the provision of tax credits for insurance to middle-class Americans. By limiting out-of-pocket expenses to a maximum of $8,150 for individuals and $17,100 for families, in addition to extending the accessibility of Medicaid beyond 100% poverty level, health insurance became more affordable for many.

In addition to these initial cost caps, ACA allowed parents to keep their children on their medical plans until they reached age 26. It also established the Small Business Health Care Tax Credit, which serves to benefit businesses with less than 25 full-time employees. It provides such businesses with a tax credit that covers up to 50% of their contribution to their employees’ health insurance coverage.

Emphasis on Preventative Care 

The second strategy that ACA addressed was putting emphasis on preventive care. Prevention focuses on the promotion of a healthy lifestyle and frequent check-ups to attempt to identify and target potential health issues before they escalate.

The ACA enacted a list of 10 essential benefits that all insurance plans must cover. They include:

  1. Preventive and wellness visits, including chronic disease management
  2. Maternity and newborn care
  3. Mental and behavioral health treatment
  4. Services and devices to help people with injuries, disabilities, or chronic conditions
  5. Diagnostic lab tests
  6. Pediatric dental and vision care
  7. Prescription drugs
  8. Outpatient care
  9. Emergency room services
  10. Hospitalization

In addition to establishing these initial benefit requirements, ACA was responsible for expanding treatment for mental health, addiction, and chronic diseases. From an insurer’s perspective, these are often the most expensive patients for whom to provide ongoing care. ACA put emphasis on programs to combat and prevent this prolonged treatment including those that focus on smoking cessation and combating obesity.

ACA also eliminated lifetime and annual coverage limits and denial of coverage due to pre-existing conditions. Insurance companies are not able to drop or deny you coverage because you have a pre-existing condition, made a mistake on your application, or because you’ve been recently diagnosed with a life-threatening disease. Additionally, they are not allowed to require new members to wait more than 90 days before coverage starts.

Lastly, ACA changed the way that insurers spend premium dollars. It declared that 85% of premium dollars paid by insured members must be spent on healthcare services and quality improvement. If these requirements are not met, insurers are required to provide covered members with a rebate.

Improve Health Care Delivery 

The final strategy that Obamacare aimed to tackle was improving how health care is delivered by doctors and hospitals.

One example of such was the establishment of Accountable Care Organizations. Rather than ACA paying for each individual test, procedure, and visit, these organizations were designed to receive coverage payments based on the care and well-being of patients. So far, these organizations have shown significant results. As such, the ACA has continued to encourage them.

Additionally, ACA encouraged the transition to digital medical records. Traditionally, medical records were kept on paper and transferring them required doing so be done by mail or fax. Now, keeping electronic medical records provided a safer, more secure filing system that provided ease of transfer.

ACA also targeted the reduction of fraudulent doctor/supplier relationships. It provided guidance to states reviewing excessive insurance rate hikes and required background checks of all nursing home staff to prevent abuse of seniors.

Overall, the Affordable Care Act, or Obamacare, provided significant advantages to the healthcare industry. The Act was designed to best benefit both insurance suppliers and recipients to ensure that patients in need receive the best care possible without breaking the bank while still ensuring that the insurance industry was not crippled in the process.

While few fully recognize the benefits that were established as a direct result of the Affordable Care Act, many of the implemented changes have since become a recognized standard across the healthcare industry.

Innovative HIA provides a complete solution for ALE employers who want to provide affordable, ACA-compliant benefits to their workers. Our streamlined technology and personal services provide a complete solution for our clients and their employees. Learn more about what we do, here.