The ACA has required people to have what the government has classified as minimum essential coverage, or else pay a penalty which now amounts to 2.5% of modified adjusted gross income over the income tax filing threshold.
While the House version of tax reform did not change the penalty in any way, the Senate version cut the penalty to 0% and in joint conference debates, the reduction was kept in the bill that was just passed by both houses. The Senate provision is not a repeal of the penalty, but instead a reduction, which could be increased by Congress in the future. While lower corporate and personal tax rates will take effect this year, this reduction will not become effective until 2019.
Under the Affordable Care Act (ACA), Applicable Large Employers (ALEs) can avoid paying the $2,000 per employee penalty for failing to offer qualifying health coverage by offering full-time employees a Minimum Essential Coverage (MEC) plan.
Offering the most basic benefits – MEC plans offer only the most basic level of benefits required under ERISA and while some may view them unfavorably, others view MECs as a viable alternative to paying costly penalties and sending employees to public Marketplaces.
MECs are extremely affordable – Since MEC plans cover only certain wellness and preventive services, many employers fund the entire cost even though this is not required. Simply offering a MEC satisfies the ALE’s obligation to offer coverage, as well as the individual mandate that can penalize employees who do not have coverage.
Some prefer a combined approach – Employers wishing to furnish more coverage may supplement a MEC with a Limited Medical Benefit plan. This can provide additional, restricted coverage for routine doctor visits and hospitalization, while still costing far less than a traditional health plan. Since employers can also be assessed $3,000 for each employee qualifying for a federal subsidy, some may pursue a combined option to keep workers from accessing a public Marketplace.
As we help companies weigh their options, MEC or a combination MEC/Limited Medical Benefit plan should be considered. If the costs associated with ACA present challenges to your organization, let us help you determine the best way to proceed
New final regulations amend the existing rules on the summary of benefits and coverage (SBC) notice requirements under Health Care Reform for SBCs with respect to coverage that begins on or after September 1, 2015.
Among other things, the new regulations place additional obligations on group health plans that enter into a binding contract with another party to provide the SBC (such as the insurer). To satisfy the requirement to provide the SBC, such a plan must:
- Monitor performance under the contract;
- Correct noncompliance as soon as practicable, if the plan has knowledge that the SBC is not being provided in a manner that complies with the law and has all information necessary to correct the noncompliance; and
- Communicate with affected participants and beneficiaries and begin taking significant steps as soon as practicable to avoid future violations, if the plan has knowledge that the SBC is not being provided in a manner that complies with the law and does not have all information necessary to correct the noncompliance.
A new SBC template and associated documents are expected to be finalized, separately from the final regulations, by January 2016 and will apply to SBCs for coverage beginning on or after January 1, 2017. Until then, the previously authorized templates may be used without penalty (including the original template), provided the SBC is furnished with a cover letter or similar disclosure that includes additional language indicating whether the plan provides “minimum essential coverage” and “minimum value.”
Be sure to visit our Summary of Benefits and Coverage (SBC) section for additional information.