Group Health Insurance Requirements for 2021
While we all await a decision from the U.S. Supreme Court on the constitutionality of the individual mandate provision of the Affordable Care Act (ACA), it’s important to remember that the ACA remains in force – and it continues to affect employers in California and nationwide.
Here are the ACA requirements that may affect your business in 2021:
The employer mandate in the ACA requires Applicable Large Employers (ALEs) to offer Minimum Essential Coverage (MEC) to their full-time employees and eligible dependents. An ALE is a business with at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year.
If you are an ALE, and you fail to offer your eligible employees “affordable” coverage that provides minimum value to 95% of your full-time employees and their children (up to the end of eligibility when they turn age 26), you are subject to ACA penalties.
California Minimum Essential Coverage (MEC) Individual Mandate
The Minimum Essential California (MEC) Individual Mandate, which started in 2020, requires California residents to have qualifying health insurance for all months of the year, obtain an exemption to have insurance, or pay a fine to the California Franchise Tax Board when taxes are filed.
MEC can be employer-sponsored coverage, Individual and Family Plan (IFP) coverage, Medicare, or Medicaid (Medi-Cal in California), etc.
Federal Minimum Essential Coverage
Under the ACA, qualifying Minimum Essential Coverage (MEC) can be any of the following:
- Any health plan bought through the federal Health Insurance Marketplace (HealthCare.gov) or a state exchange (like Covered California in California)
- Individual health plans bought outside the Health Insurance Marketplace, if the coverage meet the standards for qualified health plans
- Any “grandfathered” individual insurance plan in place since March 23, 2010, or earlier
- Any job-based plan, including retiree plans and COBRA coverage
- Medicare Part A or Part C (but Part B coverage by itself doesn’t qualify)
- Most Medicaid coverage, except limited coverage plans
- Coverage through the Children’s Health Insurance Program (CHIP)
- Coverage under a parent’s plan (for an eligible child under age 26)
- Most student health plans (if the plan counts as qualifying health coverage)
- Health coverage for Peace Corps volunteers
- Certain types of veterans health coverage through the Department of Veterans Affairs
- Most TRICARE plans
- Department of Defense Non-appropriated Fund Health Benefits Program
- Refugee Medical Assistance
- State high-risk pools for plan or policy years that started on or before December 31, 2014 (check with your high-risk pool plan to see if it counts as qualifying health coverage)
All ACA-compliant health plans have to include coverage for 10 Essential Health Benefits (EHBs):
- Ambulatory patient services (outpatient care without being admitted to a hospital)
- Emergency services
- Hospitalization (like surgery and overnight stays)
- Pregnancy, maternity, and newborn care (both before and after birth)
- Mental health and substance use disorder services, including behavioral health treatment that includes counseling and psychotherapy
- Prescription drugs
- Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions or to help an insured gain or recover mental and physical skills)
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care (Note: Adult dental and vision coverage not essential health benefits)
No Mandate for Non-ALEs
If your business is not an ALE, there’s no requirement that you offer ACA-compliant health coverage to your employees. (If you’re not sure whether your business is an ALE, ask your employee benefits or insurance broker, or access the Employer Shared Responsibility Provision Estimator on the IRS website.)
Many times, regardless of group size, employers offer employee health benefits to help them attract and retain workers. While the unemployment rate is higher today than a year ago due to the impact of the coronavirus, [health insurance or unemployment???] rates are expected to decline as businesses reopen and hiring resumes. Employee health insurance can help you differentiate yourself as an employer, keep your employees happy, and offer you tax advantages, too. Businesses can generally deduct expenses for providing health insurance to employees and dependents on both their state and federal taxes.
In the 10 years since the ACA became law, the number of Californians without health insurance has declined dramatically. The rate of uninsured residents in California reached 12.4% in 2010 during the Great Recession, as compared to 7.2% in 2018.
Among those with health insurance, a majority get their coverage through their employer. According to the Kaiser Family Foundation analysis of 2019 data, California is among the states with the highest number of individuals with employer-sponsored health insurance: 18.3 million Californians, or 47% of those with health insurance.
Shopping and Comparing Plans
If you are interested in comparing the employee benefits options available in your area, one of the best ways to do so is to talk with a broker. The services are typically available free of cost, and consulting one can actually save you money.
That’s because a local broker will know your local marketplace, the HMO, PPO, and other options available, health care providers that are part of each health plan’s network, and the available value-added benefits.
If you do not have a broker, we can help you find one here.