As the Patient Protection and Affordable Care Act (PPACA) continues to be implemented, employers and their employees have questions about how the health care law affects them.
In an effort to keep our clients up to date about PPACA, we commit to answering the many questions that arise. Here is a basic sampling of the top questions:
Q: What is the individual mandate?
A: The individual mandate is the provision in the PPACA that says most US citizens and legal residents must have health insurance. For a listing of exemptions refer to www.Healthcare.gov. Some examples include: those who are incarcerated, members of a federally recognized tribe, those with religious exemptions, etc.
Your employees who do NOT comply with the individual mandate will be responsible for penalties when preparing individual tax returns. For 2014, the penalty equates to the greater of $95 or 1% of your annual income. If you earn under $10,150, there is no penalty. For 2015, the penalty equates to $325 or 2% of annual income. For 2016, the penalty equates to $695 or 2.5% of annual income.
As you can see, the Affordable Care Act has a direct impact on your employees regardless of whether or not you offer coverage. Dollars spent paying penalty fees could be used to contribute to group health insurance premiums, which in turn can lead to numerous benefits for your business – including employee retention, higher morale and peace of mind for our employees.
Q: What is the exchange or marketplace?
A: The public marketplace, or exchange, is the website where individuals can comparison shop for health plans and sign up for coverage. You have probably heard this referred to as: www.Healthcare.gov.
Federal tax subsidies to help pay for medical coverage may be available to eligible individuals if they enroll for coverage through the public marketplace.
The types of plans offered through the marketplace must be qualified health plans and must meet certain “metallic” levels of coverage – bronze, silver, gold or platinum. These metallic designations refer to the actuarial value of the plan, or how much, on average, the plan pays for the cost of covered benefits.
Q: What are essential health benefits?
A: Effective for plan years beginning on or after January 1st, 2014, all plans offered through the exchange are also required to cover certain, essential benefits. The PPACA requires plans to cover at least 10 general categories of items and services:
- Ambulatory patient services (outpatient care)
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder benefits, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Q: Who is eligible for a subsidy through the individual marketplace?
A: Some individuals are eligible for tax credits to assist with premium payments and cost-sharing. Individuals with incomes between 100% and 400% of the federal poverty level are eligible, a family of four with income between $23,850 and $95,400.
Q: As an employer, should I offer health insurance to my employees?
A: Should you decide not to provide health insurance to your employees, you may be subject to penalties of up to $3,000 per employee. If you do provide coverage, it must be affordable and meet minimum value requirements. To maintain affordability, premiums may not exceed 9.55% of an employee’s annual income.
Most employees will find coverage offered through an employer to be more affordable than coverage offered on the marketplace based on your contributions. You have to weigh the cost of providing the benefit against the penalties as well as the intangible impact of not offering any coverage to your employees.
For help in making this important decision, we can work with you through our many resources and tools to estimate potential penalties against the cost of providing health care coverage to your employees.
This content is provided without any warranty of any kind. MedCon has taken reasonable steps to ensure this information is accurate and timely. If you have specific questions that pertain to your unique business environment or industry, we recommend that you consult legal council.