Choice Stories

December 18, 2017

Individual Mandate Repeal Has Little Impact on Employers

Highlights/Key Takeaways
  • Individual mandate still applies in 2018; it goes away in 2019.
  • End of individual mandate won’t affect majority of Americans since more people get health coverage through their employer, Medicare, and Medicaid than individual health plans.
  • Greater enforcement of the employer mandate began by the IRS in the fourth quarter of 2017.
  • Congress could still act to end employer mandate – but a timeline is uncertain.

Actions by Congress and the White House during the final weeks of 2017 to repeal the individual mandate provision of the Affordable Care Act (ACA) through the GOP’s tax bill drew a lot of press coverage in December. However, something being overlooked is that the repeal does not take effect until 2019.

Also, it’s important to recognize, most working Americans get their health insurance through their employer (or through a public health program like Medicare, Medicaid, or the military), so getting rid of the individual mandate won’t affect employers or the majority of U.S. residents.

In contrast to comments from President Trump that the individual mandate elimination amounts to a repeal of ObamaCare, the reality is that the health care law, the individual mandate, and the employer mandate remain in force for 2018. Americans who don’t have minimal health care coverage (and who don’t qualify for a hardship exemption) and employers who don’t offer employees health coverage (where required) are still subject to a fine.

The 2018 individual mandate fines (which are payable with an individual’s 2019 tax filing) are hefty – the greater of $695 per adult or 2.5 percent of household income, up to a maximum equal to the total annual premium for the national average price of a Bronze tier plan sold through the Marketplace. The penalty for not having health insurance is $347.50 per child (under age 18), up to a maximum of $2,085 per family (including all adults).

In calculating and paying the penalty, only the part of a person’s household income that is above the yearly tax-filing requirement is counted. In addition, the penalty applies only to those in the household without health insurance coverage, so if one member of a family has coverage (on his or her own or through an employer), he or she is excluded from the penalty calculation.

If a person has coverage for a part of the year, the penalty is one-twelfth the annual amount for each month in which he or she doesn’t have health insurance. If a family lacks health coverage for only one or two months during the year, there’s no penalty at all.

Before passage of the tax bill, the New York Times reported in November that the Internal Revenue Service (IRS) had quietly begun to enforce the employer mandate of the ACA. The newspaper said many businesses were expected to begin receiving letters from the IRS that they owe the government money for failing to offer qualifying health coverage to eligible employees.

The first round of letters was sent in October to companies with at least 100 full-time employees who defied the employer mandate in the first year it took effect, 2015. Larger firms, defined in the ACA as those with 50 or more full-time or full-time equivalent employees, are required to offer “affordable” coverage or face penalties of around $2,000 for each employee working 30 or more hours per week (excluding the first 30 workers). These penalties are forecast to bring in more than $200 billion over the next decade, according to the Congressional Budget Office.

In his first executive order after taking office in 2017, President Trump asked government agencies to waive, defer, or delay carrying out as much of the ACA as possible. However, the U.S. Treasury Department said in November it was compelled to implement the employer mandate. For most of the past four years, the IRS has received little funding to execute the ACA, and a recent audit by the inspector general for tax administration found the agency has “delayed, not initiated, or cancelled” many of the crucial systems necessary to fully enforce the employer mandate.

While the employer mandate could be eliminated by Congress in the future, many businesses may still want to offer employee benefits (and options for dependents) as a recruiting tool in a tightening job market. In its report, 2016 Strategic Benefits—Leveraging Benefits to Retain and Recruit Employees, the Society for Human Resource Management (SHRM) said organizations need to present themselves as an “employer of choice” to appeal to a wide range of employee demographics. And 95 percent of employees rank health care benefits as among the most important.

If you want to learn more about how a multi-carrier, health insurance program like CaliforniaChoice can help you attract and retain employees, deliver more choice, and still help you control your benefits costs, contact your broker. If you don’t already have a broker, we can help you find a CaliforniaChoice broker to speak with about employee benefits options for your company.

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