I was honored to be asked to convert a previous blog post into a presentation for my fellow Goldman Sachs 10KSB Alumni. Here it is:
Kaiser has the easiest of these diagrams to digest. This one has the updated penalties for 2017. Enjoy:
Here is a personal look at the impact of the impact the Affordable Care Act has had on me and my family. For reference, in the beginning of 2016, I was 45, my wife 42 and my kids 13, 10 and 5. Unfortunately, we are all a year older going into 2017.
I am using Blue Cross of Louisiana’s most popular Gold-level plan for my unsubsidized premium comparison. The plan has a $1,000 deductible ($3,000 for the family) and and out of pocket maximum of $5,000 going down to $4,800 in 2017 ($10,000 going down to $9,600 in 2017 for the family).
- 2016 Premiums – $1,583.70 per month or $19,004.40 for the year
- 2017 Premiums – $2,023.05 per month or $24,276.60 for the year
That is an increase of $439.35 per month or $5,272.20 for the year. It also represents a 27% rate increase. OUCH!!!
My wife and I both work (pretty hard, I might add). To be fair, if our combined income was lower, we would qualify for some help with this premium. You can check your own subsidy availability here. At $113,000 in combined family income, we would qualify for $303/month in help. At $114,000 or more, we do not qualify for any help. I think this is what President Clinton referred to as “the craziest thing in the world.”
Some more broad trends of note:
- the % increase on some “more affordable” plans (silver and bronze level) is as much as 44%
- there are more “narrow network” plans this year – both in total number and more drastically in % of total plans available.
- comparable small group plans are significantly better priced and offer significantly more coverage options. See – The Small Business Health Insurance Roller Coaster – What is Next? – If you have a business or influence with your small employer, it may be time to run some numbers.
I hope our next President and Congress work together for a better solution for all of our sake. This is not sustainable.
I have spent my entire 24 year career helping employers shop for, buy and manage their employee benefits. In that time, the vast majority of large employers (50+ employees – for this discussion) have offered (and plan to continue to offer) their employees health insurance. In 2010, the Affordable Care Act introduced new incentives (see employer shared responsibility penalties) to make sure that continues. So far, it looks like that is happening as expected.
However, the small employer market (under 50 employees – not subject to employer mandate) has been much more volatile over the last 15 years. That volatility has intensified in recent years. – peaking at 66% in 2010 and then bottoming out at 52% just 4 years later.
Why has this happened and what does the future hold for small employers?
For small businesses, the initial decision to offer benefits is almost always driven by a key employee/employees who push the issue with the business owner. Leading up to the 2010 passage of the Affordable Care Act, every news organization, talk show, politician, etc. talked about healthcare and health reform in some form just about every day. So, naturally, employees who had not thought about it before, were now asking about it. Employers who hadn’t offered coverage before decided to make an offer for the first time.
This led to an almost 10% jump in firms offering health benefits from 2009 to 2010. But, that increase completely vanished in 2011. And, over the following years, the trend to away from group insurance increased as the % of firms offering health benefits reached a 15+ year low in 2014.
For employers with a higher percentage of low income employees, the move away from group insurance may continue. This is because these employers cannot (and do not want to) compete financially with the subsidy available to low income employees. Here is an example of how income impacts an individual’s coverage choices:
An unmarried 40 year old with 2 children under 18 years old can expect to pay about $391/month for herself or about $779/month for her and her children with no subsidy or medicaid available. She will also have the following subsidy options at different income levels:
|Household Income||Medicaid?||Subsidy – Net cost|
|$25,000||Yes – entire family||None – $0/month|
|$35,000||Yes – children only||$180/month – $211/month|
|$45,000||Yes – children only||$59/month – $332/month|
|$55,000||No||$254/month – $525/month|
|$65,000||No||$138/month – $641/month|
|$75,000||No||$57/month – $722/month|
|$85,000||No||None – $779/month|
However, I expect that employers with higher-paid and geographically diverse employees will see that trend of moving away from group coverage reverse considerably. This has already started and will accelerate very quickly. Here are the 3 main drivers of that move:
- Taxation of Employer Contribution to Individual Plans – In an updated Q&A about the practice of reimbursing individual health premiums, the IRS Q&A warns: “such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.” Though there are pockets that disagree with this interpretation and are fighting for a change, most have come to grips that it is best to avoid the practice rather than risk penalties.
- Implosion of the Individual Health Insurance Market – Just about every carrier that has offered products on the individual exchange has lost money. Some have lost so much money, they have decided to get out of the exchanges altogether. The carriers that have remained have increased their prices significantly while drastically limiting their product offering – eliminating platinum-level plans, restricting the number of zip codes that they offer policies AND introducing more and more “narrow” network options.
- Small Group Relative Stability – Trend price increases for small group (and group in general) have been modest in comparison to what we were seeing a few years back (pre-ACA) AND are modest compared to increases we have seen and expect to see in the individual market. In addition, there are now considerably more plan options to choose from in group vs. individual. And finally, the price of comparable group plans are less than individual plans with similar benefit levels.
Individuals who are not eligible for subsidies because of their income will discover this discrepancy and push for change from their employer. It will start with the business owner who is just a phone call or email away from discovering what this means to them and their families.
If you own a small business and want to see how all of this impacts you, your family and your employees we are always here to help.
Have you received a Health Insurance Marketplace Subsidy Notice (Subsidy Notice) from the Department of Health and Human Services (HHS)? If so, your response may affect whether or not the IRS later assesses a pay or play penalty. This article explains the appropriate way to respond to these notices.
HHS recently began sending Subsidy Notices to employers. The purpose of the Subsidy Notice is to inform employers that an individual—who identified the employer as his or her employer—enrolled in health insurance through the Health Insurance Marketplace and was certified as eligible for an Advanced Payment of Premium Tax Credit (APTC).
Pay or play penalties are potentially triggered when at least one of an applicable large employer’s (ALE) “full-time employees” (as that term is defined under the Affordable Care Act or ACA) receives an APTC.
Subsidy Notices are sent by HHS. Only the IRS can assess a pay or play penalty. So, it is important for employers to understand:
- The Subsidy Notices do not determine whether the employer is subject to a pay or play penalty; and
- Failure to appeal the Subsidy Notice does not preclude the employer from later appealing the assessment of a pay or play penalty by the IRS.
Applicable Large Employer Responses to Subsidy Notices
First and foremost, an employer should not appeal a Subsidy Notice on behalf of an employee for whom the employer did not: (1) offer coverage under its group health plan; or (2) offer coverage that was both affordable and of minimum value.
As explained below, however, employers should carefully consider whether to appeal the Subsidy Notices received on behalf of other employees—especially full-time employees—who were offered coverage under the employer’s group health plan that is both affordable and of minimum value.
Only full-time employees can trigger a pay or play penalty. If an employer receives a Subsidy Notice on behalf of a full-time employee who was offered affordable, minimum value coverage, it may be in the employer’s best interest to appeal the Subsidy Notice. This may allow the employer to “nip in the bud” the issue of a later assessment of a pay or play penalty by the IRS. (Alternatively, if the IRS still assesses a pay or play penalty on behalf of a full-time employee who the employer successfully appealed a Subsidy Notice, the evidence of the successful appeal may be helpful to the employer in contesting the IRS’s assessment of a pay or play penalty.)
It may not only be in the employer’s best interest to appeal the Subsidy Notice—it may also be in the employee’s best interest because the employee may be ineligible for the APTC. In other words, a successful appeal of the Subsidy Notice may also limit the amount of the APTC that the ineligible employee must repay.
A non-full-time employee cannot trigger a pay or play penalty. So, it is unnecessary to appeal a Subsidy Notice received on behalf of a non-full-time employee for purposes of the pay or play penalty.
If an ALE offered a non-full-time employee affordable, minimum value coverage, however, the ALE may want to appeal the Subsidy Notice to limit the amount of the APTC that the employee must repay.
Non-Applicable Large Employer Responses to Subsidy Notices
Non-ALEs (generally employers with less than 50 full-time and full-time equivalent employees) are not subject to the pay or play penalty. So, again, there is no reason for a non-ALE to appeal a Subsidy Notice for pay or play penalty purposes.
But a non-ALE may consider appealing a Subsidy Notice on behalf of an employee who was offered affordable, minimum value coverage, to limit the amount of the APTC that the employee must repay.
How to Appeal the Subsidy Notice
To appeal the Subsidy Notice, an employer should use the form provided by HHS, which is available at healthcare.gov (https://www.healthcare.gov/marketplace-appeals/employer-appeals). This form provides a space for the employer to include a narrative explaining why the employee is ineligible for an APTC. In this narrative, the employer should indicate that the employee was either enrolled in coverage under the employer’s group health plan or that the employee was offered coverage under the employer’s group health plan. The employer should also include the employee’s cost of employee-only coverage under the employer’s lowest-cost group health plan and an affirmative statement that the group health plan provides minimum value.
In addition to the narrative, the employer may include supporting documentation, such as:
- A copy of the election form (or a screenshot from an electronic enrollment platform) showing that the employee is enrolled in the employer’s group health plan, or was offered and waived coverage under the employer’s group health plan.
- If the employee didn’t affirmatively waive coverage, the employer should include plan records showing that the employee was offered coverage but failed to elect coverage under the employer’s group health plan.
- Any materials evidencing the employee’s cost of coverage. (Evidence of satisfying an affordability safe harbor may be helpful, but will not be determinative of actual affordability.)
- Evidence that the employer’s group health plan is of minimum value (e.g., a summary of benefits showing that the group health plan covers at least 60% of eligible expenses).
- A copy of the Subsidy Notice
As a reminder, an ALE’s decision to appeal Subsidy Notices has no bearing on the ALE’s ability to later appeal the IRS’s assessment of a pay or play penalty. But being proactive in appealing Subsidy Notices may prevent the IRS from later assessing a pay or play penalty.
If you have any questions about Subsidy Notices or how you should respond, please contact the Benefit Administration Group.
Due to concerns about whether current federal Health Insurance Marketplace rules and procedures are sufficient to ensure that only those who are eligible enroll through special enrollment periods, the Centers for Medicare & Medicaid Services (CMS) has created a new verification process for individuals to apply.
How Special Enrollment Confirmation Works
Beginning in the next several months, all consumers who enroll or change plans using a special enrollment period for any of the following triggering events will be directed to submit documentation to verify their eligibility:
- Loss of minimum essential coverage;
- Permanent move;
- Birth, adoption, placement for adoption, placement for foster care or child support or other court order; or
CMS will provide consumers with lists of qualifying documents, such as a birth or marriage certificate. Consumers will be able to upload documents to their HealthCare.gov accounts or mail them in.
In case you don’t recognize the format, this is an excerpt from an IRS favorite: Instructions for Forms 1094-C and 1095-C.
Code Series 1— Offer of Coverage. The Code Series 1 indicator codes specify the type of coverage, if any, offered to an employee, the employee’s spouse, and the employee’s dependents. The term “dependent” has the specific meaning set forth in the Definitions section of these instructions. In addition, for this purpose an offer of coverage is treated as made to an employee’s dependents only if the offer of coverage is made to an unlimited number of dependents regardless of the actual number of dependents, if any, an employee has during any particular calendar month. An offer of COBRA continuation coverage that is made to a former employee upon termination of employment should not be reported as an offer of coverage on line 14. For a terminated employee, code 1H (No offer of coverage) should be entered for any month for which the offer of COBRA continuation coverage applies. An offer of COBRA continuation coverage that is made to an active employee (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee. If the type of coverage, if any, offered to an employee was the same for all 12 months in the calendar year, enter the Code Series 1 indicator code corresponding to the type of coverage offered in the “All 12 Months” box or in each of the 12 boxes for the calendar months.
- 1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least minimum essential coverage offered to spouse and dependent(s).
This code may be used to report for specific months for which a Qualifying Offer was made, even if the employee did not receive a Qualifying Offer for all 12 months of the calendar year. However, an employer may not use the Alternative Furnishing Method for an employee who did not receive a Qualifying Offer for all 12 calendar months (except in cases in which the employer is eligible for and reports using the Alternative Furnishing Method for 2015 Qualifying Offer Method Transition Relief as described in these instructions).
- 1B. Minimum essential coverage providing minimum value offered to employee only.
- 1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).
- 1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).
- 1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.
- 1F. Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.
- 1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.
- 1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage, which may include one or more months in which the individual was not an employee).
- 1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage; received an offer that is not a qualifying offer; or received a qualifying offer for less than 12 months.