ACA Backlash: Two States Create Their Own Individual Mandates
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The Trump Administration effectively repealed the Affordable Care Act’s individual mandate when it made the penalties for an individual not obtaining healthcare $0 beginning 2019. What seemed like a major setback for the Affordable Care Act’s integrity is being made up elsewhere as states push to enact their own statewide initiatives to address the gap causing more healthcare challenges for state residents.
The month of May was important for two states in particular, Vermont and New Jersey. During the final week, both states passed into law their own statewide individual mandates. On May 28, Governor Scott signed into law the state of Vermont’s Individual Mandate and on Wednesday, May 30, Governor Phil Murphy of New Jersey set forward the motions for a New Jersey Individual Mandate.
Here are some details.
- New Jersey
Beginning January 1, 2019, residents of New Jersey will be required to have health insurance or be subject to a state tax penalty. The penalties collected will be allocated towards a Health Insurance Security Fund, which will help subsidize healthcare costs for seniors and the chronically ill. Officials of the state believe that individual mandate was a critical component of the Affordable Care Act’s integral foundation. When the penalty is removed in 2019, the state anticipated a drop in individual state residents electing to enroll in healthcare coverage. Nationally, the Congressional Budget Office (CBO) has projected roughly 13 million individuals will go uninsured once the federal individual mandate is nullified. New Jersey State Senator Joseph Vitale in an article by NJ.com said that the state’s individual mandate “was needed to maintain a foundation for the insurance market and to allow the success of the ACA to continue.” - Vermont
Starting in 2020, residents of Vermont will be required to have health insurance or be subject to state tax penalties with the passage of a revised legislative bill H.696. The specifics for how the statewide mandate will exist have not been published, but state officials will establish a working group to iron out details in 2019 prior to the launch of the new requirements starting on January 1, 2020. In the meantime, no state penalties will be imposed on residents who do not obtain healthcare coverage prior to 2020. Vermont residents will be contacted by state officials as part of “educated outreach efforts” to answer any questions and inform residents of the policies and procedures as they are determined prior to going into effect in 2020.
New Jersey and Vermont have become the second and third states to pass a statewide individual mandate following in the path of Massachusetts, which set its own individual mandate over a decade ago.
It’s unclear if other states will follow the same path as New Jersey and Vermont. However, there are many states engaged in some type of healthcare reform at the state level. Currently in Maryland, seven major Democrats running for Governor have all agreed to a plan to what is being called “health insurance down payment” program, which among other ACA related items, will create a state individual mandate. The penalty imposed on individuals for failing to obtain health coverage would be used as a “down payment” to obtain health insurance policies.
Other states such as Hawaii, Connecticut, Rhode Island, Minnesota, California, and the District of Columbia have been considering their own versions of individual mandates for residents.
As states continue to pass their own legislation relating to the healthcare in reaction to changes to the ACA at the federal level, the complexities of reporting and complying with the law will become more complex.
The IRS is enforcing the federal individual mandate for 2018. Residents are still required to have health insurance or be subject to penalties come tax season. The IRS is also continuing with its enforcement of the ACA’s employer mandate. Letter 226J tax penalty notices are being issued for ACA information filings for the 2015 tax year, some of which ranging in the millions of dollars. To date, 30,000 notices representing $4.3 billion in penalty assessments have been issued for 2015. Notices for tax years 2016 and 2017 are expected to follow.
To learn more about Letter 226J penalty notices being issued by the IRS, click here.
This could be a good time to take a look at your past ACA filings with the IRS to confirm that your compliance process is as good as it can be.
There also may be value in having an outside vendor with expertise in ACA compliance to review your previous ACA filings with the IRS. Many third-parties will do this at no cost to you.
As the regulatory requirements of healthcare grow more complex, having more help to address them may be a worthwhile investment compared to the risk of being assessed significant penalties for non-compliance.
To learn more about ACA compliance in 2021, click here.
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