I’m covered by a plan at work. Will I keep that same plan?
That depends. The so-called “employer mandate” says that employers with 50 or more full-time equivalent employees must provide affordable and qualified coverage or pay a fine. Affordable means that the employee portion of the premium for just the worker (not family coverage) is less than 9.5 percent of the employee’s household income. Since most employers won’t know (and can’t ask) what employees’ household incomes are, there is a safe harbor available: Affordability can be calculated based on the employee’s income at that job, as long as the plan also meets a safe harbor plan design.
Qualified coverage means the plan offers minimum essential health benefits as defined by the Affordable Care Act. Should your plan not meet that definition, your employer is not required to change it; however employer penalties will apply anyway, as if coverage wasn’t offered at all. The plan you already have can be grandfathered in (if it was in existence on March 23, 2010), meaning it may exempted from certain provisions such as covering preventative care at 100 percent, but only for as long as the plan remains substantially the same, not changing certain coverage levels or employee contributions. Should your copays rise by an amount more than the rate of medical inflation plus 15 percent, for example, the plan will lose its grandfathered status. That can be a good thing if it means your coverage is improved, but it may also cost you more.
If your current plan does in fact meet both criteria of affordability and minimum coverage, your employer should be allowed to continue offering it.
How much are the penalties?
If a large employer fails to offer qualified coverage to at least 95 percent of its employees, and at least one of those not offered coverage receives a premium tax credit, the employer will be fined $2,000 annually for each full time employee, after excluding the first 30 employees in calculating that number.
For coverage that is not considered affordable, employers are fined $3,000 annually for each employee who does not choose coverage, purchases coverage through an exchange, and receives a premium subsidy.
It’s quite possible then that some employers will decide that it is more financially advantageous to pay the penalty rather than offer insurance, which would be more costly.
What if I can’t afford the premiums, even though my plan meets the affordability mandate?
Unfortunately, if you are offered a qualified, affordable health plan through work, you are not eligible for premium subsidies. This will especially be an issue for lower wage earners who also need to cover their families. Dependents under age 26 must be included in coverage, but there is no requirement to cover spouses. That means that you may be required to pay the entire spousal premium, which for many will be too expensive to bear. This has been referred to as the “family glitch,” and there is talk of fixing this part of the law.
What other options do I have? Do I have to buy insurance?
You can purchase coverage yourself through the new health insurance exchanges. Or you can choose to forego coverage and pay a penalty, which is the greater of $95 or 1 percent of your income for the tax year 2014, rising to $325 or 2 percent of income in 2015 and $695 or 2.5 percent of income in 2016.
How will the government know if I have coverage?
That’s one of those things they haven’t exactly worked out yet, but you ikely will be required to file a form or proof from your insurance company along with your tax return.
How do I pay the penalty?
That’s kind of an interesting thing. The IRS will be responsible for collecting the penalty, but will not be allowed to use many of the typical collection tactics, like seizing your assets or taking you to court. It essentially will be left with the alternative to reduce your tax refund by the amount of the penalty. Draw your own conclusions there.
Is there a way to be exempted from the penalty?
There are some “outs.” If you are between jobs, for instance, the penalty will not apply until you have gone without insurance for three months. If your income is below the filing requirement for federal taxes, you won’t be subject to the penalty, either. Other exemptions are those who have religious objections, are incarcerated or are member of a Native American tribe.
I buy insurance on my own already. What will change?
Currently, many individual plans offer low coverage levels in order to keep premiums affordable. Starting next year, individual plans will also be required to provide minimum levels of coverage, covering things like maternity care and prescriptions. Beginning in 2014, insurers will be prohibited from excluding preexisting conditions. In the past, insurers could agree to cover an individual, but exclude benefits for diseases or conditions that person had been treated for some time before. While that is good news on the benefit front, all those things come at a price. Premiums will rise accordingly. However, premium subsidies begin in 2014.
One feature of Obamacare is the ability to comparison shop online and view plan features and costs side by side. Although many are anxious to see what will be included and what the premiums will be, the information will not be available until October for plans beginning in January 2014. While premiums can no longer be based on health history, they will consider age, smoker status and geographical region.
Who can get a premium subsidy?
Individuals with no employer offered health insurance may apply for subsidies. Employees who are offered qualified affordable coverage at work but choose not to enroll are not eligible for premium subsidies. Employees who are not offered that coverage can purchase insurance on the exchange and receive premium subsidies based on household income.
The income limit is fairly generous; a family can qualify for some amount of subsidy with an income as high as $94,200. Check out the Kaiser Foundation’s calculator to get an idea of what you might qualify for.
How do I apply for the subsidy?
The original draft of the subsidy application was a whopping 61 pages long. The bulk of the application was aimed at making sure you weren’t eligible for coverage or help elsewhere, like through the VA or TriCare. However, a new application was unveiled just this week, weighing in at only three pages. No one knows exactly what the final version will entail, but we do know you’ll need to complete some sort of application to be eligible.
Many of the details of how Obamacare will play out remain to be seen, as the interpretation is changing constantly.
I hope this gives you a basic understanding of what is to come, as much as we can know for now. I’ll write more about the Affordable Care Act from the business perspective in a future column. Stay tuned.