This blog post was authored by Jessica Frier
What is the so-called “individual mandate”?
Beginning January 1, 2014, individuals are required to maintain health insurance coverage, or face a tax penalty unless certain exemptions apply. The individual mandate applies to all individuals except for the following:
- Is a member of a recognized religion opposed to the acceptance of health insurance benefits
- Is an undocumented immigrant
- Is incarcerated
- Is a member of an Indian tribe
- Has a family income below the federal income tax filing threshold (in 2013, $10,000 for an individual, $20,000 for a family);
- Would have to pay more than 8% of his or her income to pay for health insurance (after including the value of any employer contributions or tax credits); or
- Qualifies for a hardship exemption under Department of Health & Human Services guidelines.
What health insurance coverage satisfies ACA’s requirements?
The federal Patient Protection and Affordable Care Act, commonly called ACA, requires everyone not listed above to maintain “minimum essential coverage.” For an individual, minimum essential coverage includes (but is not limited to) the following types of coverage:
- Medicare or Medicaid
- Tricare, the veteran’s health program and certain other government-sponsored programs offered by the Department of Defense
- Eligible employer-sponsored plans
- Qualifying plans in the individual market
- Retiree coverage under a group health plan.
What penalties apply to individuals who do not have health coverage?
In 2014, the penalty is $95.00 for each adult and $47.50 for each child (with a maximum of $285 per family) or 1% of family income, whichever is greater. The penalty is slated to increase in 2015 and again in 2016 to reach a maximum of $2,085 per family or 2.5% of family income, whichever is greater. After 2016, penalty amounts will increase annually according to the cost of living.
Is financial assistance available to help individuals afford coverage?
Yes. Starting in 2014, individuals seeking health coverage will have help paying for coverage through tax credits (“subsidies”), cost-sharing reductions and expanded Medi-Cal assistance. Tax credits are available for individuals and families who meet certain income requirements and do not have access to affordable health insurance through their employer that also meets minimum coverage requirements. Eligibility for tax credits is based on the federal poverty level. Individuals and families who make between 138 percent and 400 percent of the federal poverty level may be eligible for a tax credit. This means that an individual making up to $44,680 and a family of four earning up to $92,200 may be eligible for a tax credit. Some individuals may also qualify for a cost-sharing reduction to help reduce out-of-pocket costs. Premium tax credits and cost-sharing subsidies will only be available to those purchasing coverage through ACA’s new state run or federal health insurance exchanges.
What is Covered California (aka the “Exchange”)?
Starting October 1, 2013, individuals in California will be able to enroll in health coverage through Covered California, California’s state-run individual insurance marketplace (or “Exchange”). Covered California will offer Qualified Health Plans guaranteed to provide essential levels of coverage and consumer protections required by ACA, which provides the framework, policies, regulations and guidelines for implementation of comprehensive healthcare reform by the states. ACA will expand access to high-quality affordable insurance and health care.will provide coverage effective January 1, 2014 if purchased during the first enrollment period. More information is available at www.coveredca.com.
How might employers be affected if employees obtain coverage through Covered California?
Covered California will ask employees who enroll in coverage for information about their employer-offered health insurance. Employers may begin to receive requests from employees seeking information regarding their employer-sponsored health plans in order to provide it to Covered California. Beginning January 1, 2015, an employer may incur penalties when a full-time employee receives a subsidy while purchasing coverage through Covered California and the employer failed to offer affordable coverage to substantially all full-time employees. Covered California will notify the employer if an employee is found eligible for a subsidy. Employers will have an opportunity to appeal this determination.
What action do employers need to take now?
Employers should be prepared to respond to inquiries from employees about Covered California and the individual mandate. Large employers (those with 50 or more full-time equivalents) should be aware that an employee who purchases subsidized coverage through Covered California can trigger a penalty to the employer beginning January 1, 2015. Employers should also keep in mind that penalties will not apply to the extent they offer affordable, minimum value coverage to substantially all full-time employees and their dependents—even if an employee decides to opt out of employer-sponsored coverage and obtain coverage through Covered California.