Health Reform FAQ

Frequently Asked Health Care Reform Questions

Small Business Questions

What is the Employer Mandate?

Starting in 2014, employers employing at least a certain number of employees (generally 50 full-time employees and full-time equivalents) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code (added to the Code by the Affordable Care Act). Under these provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees, they may be subject to an Employer Shared Responsibility penalties if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges.

Does the Employer Mandate apply to groups with 49 or fewer employees?

The simple answer is NO. To be subject to the Employer Shared Responsibility provisions, an employer must employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50.  Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year. For example, if an employer has at least 50 full-time employees, (including full-time equivalents) for 2013, it will be considered a large employer for 2014.

How are FTE (Full-time equivalents) calculated?

If you have 40 full-time employees employed 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average, then your company would have the equivalent of 50 full-time employees.  As defined by the statute, a full-time employee is an individual employed on average at least 30 hours per week (so half-time would be 15 hours per week).  Therefore, 100 half-time employees equals 50 full-time employees.

How do Employers with nearly 50 employees determine if they meet the large employer threshold?

Employers average their number of employees across the months in the year to see whether they meet the large employer threshold. The averaging can take account of fluctuations that many employers may experience in their work force across the year. For those employers that may be close to the 50 full-time employee (or equivalents) threshold and need to know what to do for 2014, special transition relief is available to help them count their employees in 2013. For example, rather than being required to use the full twelve months of 2013 to measure whether it has 50 full-time employees, an employer may measure using any six-consecutive-month period in 2013. So an employer could use the period from January 1, 2013, through June 30, 2013, and then have six months to analyze the results, determine whether it needs to offer a plan, and, if so, choose and establish a plan. The proposed regulations provide additional information about how to determine the average number of employees for a year, including information about how to take account of salaried employees who may not clock their hours and a special rule for seasonal workers.

What if our current Group Insurance does not renew until late 2014?

For an employer that as of December 27, 2012, already offers health coverage through a plan that operates on a fiscal year rather than calendar year, transition relief is available.

First, for any employees who are eligible to participate in the plan under its terms as
of December 27, 2012 (whether or not they take the coverage), the employer will not be subject to a potential penalties until the first day of the fiscal plan year starting in 2014.

Second, if (a) the fiscal year plan was offered to at least one third of the employer’s full-time and part-time employees at the most recent anniversary month/open season or (b) the fiscal year plan covered at least one quarter of the employer’s employees, then the employer will not be subject to the Employer Shared Responsibility penalties with respect to any of its full-time employees until the first day of the fiscal plan year starting in 2014, provided that those full-time employees are offered affordable coverage that provides minimum value no later than that first day. For example, if during the most recent anniversary month/open season an employer offered coverage under a fiscal year plan with a plan year starting on July 1, 2013 to at least one third of its employees (meeting the threshold for the additional relief), the employer could avoid liability for a penalty if, by July 1, 2014, it expanded the plan to offer coverage satisfying the Employer Shared Responsibility provisions to the full-time employees who had not been offered coverage. For purposes of determining whether the plan covers at least one quarter of the employer’s employees, an employer may look at any day between October 31, 2012 and December 27, 2012.

What is the Affordability plan requirement?

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee. If an employer offers multiple
healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement. 

Since employers generally will not know their employees’ household incomes, employers can take advantage of one of the affordability safe harbors set forth in the proposed regulations. Under the safe harbors, an employer can avoid a payment if the cost of the coverage to the employee would not exceed 9.5% of the wages the employer pays the employee that year, as reported in Box 1 of Form W-2, or if the coverage satisfies either of two other design-based affordability safe harbors.

What are the penalties for not adhering to the Employer Mandate?

In 2014, if an employer with 50 or more full-time employees/equivalents chooses NOT to offer affordable coverage during the calendar year to at least 95% of its full-time employees, it owes an Employer Shared Responsibility penalty equal to the number of full-time employees for the year (minus 30) multiplied by $2,000. This penalty will be assessed as long as at least one full-time employee receives the premium tax credit (subsidy) via the government exchanges.

For an employer that offers coverage for some months but not others during the calendar year, the payment is computed separately for each month for which coverage was not offered. The amount of the penalty for the month equals the number of full-time employees for the month (minus up to 30) multiplied by $166.67 (1/12 of $2,000). The penalty for the calendar year is the sum of the monthly penalties computed for each month for which coverage was not offered.

For an employer that chooses to OFFER affordable coverage to at least 95% of its full-time employees in 2014, but has one or more full-time employees who still receives a premium tax credit (subsidy), the penalty is computed separately for each month. The amount of the penalty for the month equals the number of full-time employees who receive a premium tax credit for that month multiplied by $250 (1/12 of $3,000). The
amount of the penalty for any calendar month is capped at the number of the employer’s full-time employees for the month (minus up to 30) multiplied by 1/12 of $2,000. (The cap ensures that the penalty for an employer that offers coverage can never exceed the penalty that employer would owe if it did not offer coverage). After 2014, these rules apply to employers that offer coverage to at least 95% of full time employees and the dependents of those employees.

Do employers have to contribute to the employee's premium?

Technically NO. The Employer mandate does NOT Require employers to contribute to the premium.  However, not doing so would likely make the plan not
affordable, putting the employer at risk for penalties.

How will the new plans be structured in the exchange?

View examples of benefit plan designs for the SHOP Silver plans released by Covered California. 

Are Employers required to offer Dependent coverage?

YES, but as of right now the ACA definition for Dependents only includes the Employee's children, NOT the employee's spouse.

Employers must offer coverage to children of an employee, but do not have to make it affordable. Since the spouse is left out of the ACA definition for "Dependents", we assume the spouse can still qualify for a subsidy via the exchange. However, the current rules do not allow the employee's children to use the exchange if the employee's has access to affordable coverage.  BUT nothing in the regulations state that those same children can not go under the spouse's exchange plan and qualify for subsidy that way.  We expect there to be new regulations introduced to make this more clear and straightforward.

The IRS said it would grant a one-time reprieve to employers who fail to offer coverage to children of full-time employees, provided they take steps in 2014 to come into compliance. Under the rules, employers must offer affordable coverage to employees in 2014 and must offer coverage, which may not be affordable to their children starting in 2015.

Individual Exchange Questions

How do you qualify for a Subsidy?

To be eligible, individuals must:

  • Have incomes between133% and 400% of federal poverty level (FPL). Current Income ranges for 133% to 400% FPL are:
  • Individual: $14,856 to $44,680
    Family of Four: $30,656 to $92,200
  •  Not have access to minimum essential coverage through their employer or have access to coverage, but it is not affordable. Employee premiums must not be higher than 9.5% of the employee's Modified Adjusted Gross Income of the individual to be considered “Affordable”.

How much it will cost for me to purchase health insurance in 2014?

We suggest using Covered California's Cost Calculator to get an estimate of what your health insurance costs will be in 2014.  If you already have affordable insurance from your employer or a government program like Medicare or Medicaid, you will not be eligible for these cost-saving programs and the calculator will not apply to you.

What are the penalties for being Uninsured?

The penalty phases in over three years and becomes increasingly more costly. In 2014, the penalty will be 1 percent of annual income or $95, whichever is greater. By 2016, the penalty will be 2.5 percent of your annual income or $695. This means that if you do not have coverage in 2014, you will be required to pay a penalty when you file your taxes at the end of the year. For more information on penalties, visit here.

Some people do not have to pay a penalty, including:

People who would have to pay more than 8 percent of their income for health insurance
People with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $27,100 for a married couple with two children)
People who qualify for religious exemptions
Undocumented immigrants
People who are incarcerated
Members of Native American tribes

There will be a penalty for people who are not covered and do not fall into one of these categories.

Do I have to purchase new insurance through the exchange?

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How will the new plans be structured in the exchange?

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