- Revisiting the Affordable Care Act
- May 3, 2017 | Authors: Antoinette M. Pilzner; Michelle Rood; Dale R. Vlasek; Gladys C. Zolna
- Law Firms: McDonald Hopkins LLC - Bloomfield Hills Office; McDonald Hopkins LLC - Cleveland Office; McDonald Hopkins LLC - Chicago Office
Over 150 million Americans currently receive their health care coverage through employer sponsored health plans. For as much as the Affordable Care Act (ACA) focused on expanding coverage for the previously uninsured and underinsured, it also extended protections to employees receiving health insurance through their employer.
After last week’s cancellation of the vote on the American Health Care Act (AHCA), the House Republican plan to repeal the ACA, it is important to take a step back and revisit some of the major ACA employer provisions that remain intact for now.
The Employer Shared Responsibility Payment (ESRP)
One of the main components of the ACA is the ESRP, commonly known as the “employer mandate.” The employer mandate requires that employers offer affordable minimum essential health care coverage that provides minimum value or face penalties. The penalties generally applied beginning in 2016, but would have been eliminated retroactively to the beginning in 2016 had the AHCA become law. The ESRP does not apply to employers with fewer than 50 full-time employees (including full-time equivalents).
The 2017 ESRPs are as follows:
- Penalty for Not Offering Coverage
For example, if an employer with 60 full-time employees does not offer qualifying coverage to at least 95 percent of such employees, the 2017 penalty would equal $67,800. Note that while the penalty amount is listed as an annual amount, the penalty is computed on a monthly basis. Thus if the employer sufficiently offered coverage for half the year, the penalty would be half that amount, at $33,900.
- Penalty for Offering Coverage that does not meet the Minimum Value and Affordable Coverage Requirements.
For example, if the employer offers noncomplying coverage, and 10 full-time employees purchase coverage on the marketplace, then the fine would be $33,900. But if an employer offering noncomplying coverage has 60 full-time employees that purchase coverage from the marketplace, instead of the $101,700 that would be owed here, the fine would be as if the employer provided no insurance at all, which would be $67,800. This annual penalty is also actually computed on a monthly basis.
- The “Minimum Value” and “Affordable Coverage” Requirements.
The Cadillac Tax
In 2015, Congress delayed implementation of the 40 percent excise tax on high-cost employer-sponsored health coverage, also known as the “Cadillac Tax,” until 2020. The AHCA would have delayed the effective date of the Cadillac Tax until 2025. The 40 percent excise tax would apply to premium costs exceeding $10,900 for single coverage and $29,400 for family coverage, starting in 2020. For example, if individual coverage costs $11,000, the tax is calculated on the excess amount ($800). The tax would be $320 per person having such individual coverage ($800 x 40 percent).
It remains to be seen whether Congress will decide to try to repeal or alter the Affordable Care Act. In the meantime, there are hefty penalties for failing to comply with the current law. We recommend that you review your current health care plan to ensure that it is ACA compliant. For more information, please feel free to reach out to the McDonald Hopkins attorneys listed below.