What Employers Should Know about the Individual Mandate

Beginning January 1, 2014, new Health Reform legislation (PPACA) requires that all US Citizens have Minimum Essential health insurance, qualify for an exception, or pay a tax penalty. The majority of Americans already have coverage that meets affordability and minimum value standards, but most individuals who are not currently covered on any plan will have the obligation to obtain coverage or face a penalty. The Individual Marketplace will be accessible October 1st for those who need coverage, who are under-insured, or have coverage that is too expensive, and wish to shop for more affordable and valuable coverage options. Coverage for plans purchased in the Marketplace will become effective as early as January 1, 2014.

Minimum Essential Health Care

Under PPACA, all plans in the Individual and Small Group markets (in the Marketplace or offered privately) must offer standard comprehensive health care known as Essential Health Benefits (EHBs). This will include:

• Ambulatory patient services (outpatient care you get without being admitted to a hospital)
• Emergency services
• Hospitalization (such as surgery)
• Maternity and newborn care (care before and after your baby is born)
• Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy)
• Prescription drugs
• Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services

Exceptions

A few groups will qualify for an exception to the Individual Mandate. These groups include:

• People who would pay more than 8% of their income for health insurance, even after taking into account employer contributions and Federal tax subsidies.
• People with income below the threshold required for filing taxes ($9,750 for single filers in 2012)
• Incarcerated individuals
• Members of a Native American tribe
• People with religious oppositions
• Undocumented immigrants

Tax Penalties

If an individual does not obtain health insurance or qualify for an exception, he or she must pay a tax penalty. The penalty will be phased in over the next few years. Here's what the annual penalties will look like:

• 2014 - the greater of $95 per adult, $47.50 per child ($285 household max), or 1% of household income
• 2015 - the greater of $325 per adult, $162.50 per child ($975 household max), or 2% of household income
• 2016 and beyond - $695 per adult, $347.50 per child ($2085 household max), or 2.5% of household income

Any penalty that taxpayers are required to pay for themselves or their dependents must be included in their return for the taxable year. Those individuals who file joint returns are jointly liable for the penalty.

Federal Assistance (Subsidies)

Tax credits will be available on a sliding scale to those who have income up to 400% of the federal poverty level and need financial assistance to purchase health insurance through the Marketplace. To be eligible for the tax credits, individuals must not qualify for public coverage (Medicaid, Medicare, CHIP, TRICARE, etc.) and must not have access to employer sponsored coverage (if that coverage meets affordability and value standards). Individuals can find out if they qualify for assistance by using this Subsidy Calculator.

What Should Employers Do?

The Individual Mandate proposes an interesting situation for employers. Although the so-called "Employer Mandate" was postponed until 2015, individuals will still be required to obtain coverage starting in 2014. Employers who don't currently offer coverage, but would be required to in 2015, may decide to delay offering coverage to employees. Meanwhile, employees who need coverage now may either search for employment that offers insurance as a benefit, or obtain coverage in the individual Marketplace, and possibly receive a subsidy for it. When 2015 rolls around, those employees who chose not to leave the company and obtained their own insurance will now be required to drop that coverage and get on the company's plan. This change may prevent the employee from receiving a subsidy, force him/her to change network providers or otherwise disrupt the employee's health care.

Employers should calculate what's affordable for their business, but also decide what the employee benefit offerings (or lack thereof) say about company's culture and ability to attract and retain high performing employees. Offering benefits now, instead of waiting until 2015, may help to build a more happy, loyal and efficient workforce. ISIhr offers both its large and small clients health coverage that meets all ACA standards, and avoids the high costs of community rated Marketplace plans. If you don't currently offer health care benefits to your employees but would like to, let ISIhr quote benefit options and prices for your group.