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It’s always interesting to look back and see how regulation develops. The Affordable Care Act (ACA) is no exception. I wrote a five-part series about the ACA for “Construction Business Owners Magazine” in 2015. I found it interesting to revisit these articles. I share this fourth article in that series, with some updates, to provide some perspective on the ACA for those of you who are involved with ACA compliance.
You and your employees have probably heard about the tax penalties under the Affordable Care Act. Starting in 2014, the “Individual Mandate” of ACA required everyone in the United States to get health coverage or pay a penalty. Effective January 1, 2019, the penalty for the Individual Mandate is $0, essentially repealing that part of the ACA. Knowing this, some states have taken action to institute an individual mandate of their own.
However, the ACA’s Employer Mandate remains in place, as do the penalties for those employers with 50 or more full-time employees and full-time equivalent employees, that are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee or be subject to IRS 4980H penalties. These penalties are assessed by the IRS in Letter 226J penalty notices sent to employers the tax agency determines have not complied with the ACA.
For this article, we are going to focus on how employees’ healthcare options are affected by the ACA.
Typically, an employee has access to the company’s healthcare plan. The employee can also choose coverage through a Healthcare Exchange. Depending on whether the company healthcare plan fails to meet certain requirements for affordability and Minimum Value (MV), the employee may also be eligible for a subsidy to help pay for healthcare coverage bought through an Exchange. When this happens, employers may receive what is called an Exchange Notice, letting them know that the employee received government assistance in paying for their health insurance and, as a consequence, the employer may be liable for penalties. The Exchange may notify the IRS, which may trigger an IRS Letter 226J.
In addition to the company’s healthcare plan, the employees and their family members may also be eligible for Medicaid, CHIP (for children), TRICARE and/or Veterans Care.
Health plans on the Exchange, as well as coverage under Medicaid and CHIP, must include coverage for 10 “Essential Health Benefits” to meet ACA requirements. These are: doctor visits; emergency services such as emergency room services; hospitalization; maternity and newborn care; mental health; prescription drugs; rehabilitation services and devices, to help you recover from injury or disability; lab services; preventative and well-being services; and pediatrics, or medical services for kids.
As your employees evaluate their various options for healthcare coverage, they need to consider what they will have to pay for each available option, and how the benefits compare.
It’s important for them to consider all of the costs – not just the most visible part, which is the monthly premium, but other costs as well.
The “deductible” is what each of us has to pay first, before the insurance company will pay for medical services. It’s important to note that health insurance deductibles are on an annual basis (rather than, say, for each illness or accident), which means that once we pay the deductible for the year, we are done.
Two other important parts of total healthcare cost are “co-pay” and “coinsurance.” Co-pay is what we pay every time we visit a doctor’s office. For example, your plan might require a $25 co-pay every time you go visit your doctor. “Co-insurance” is similar to a co-pay, but is a percentage rather than a fixed dollar amount. So, if your plan has 20% co-insurance and the cost for a medical service is $100, you pay $20.
Another part of the healthcare cost total is “out of pocket costs.” If you receive medical services that are not covered by your insurance plan, you are responsible for paying for those services out of your own pocket, with no help from insurance.
When looking at available healthcare options, your employees should compare the total costs for each – including premiums, deductibles, co-pays, co-insurance and out-of-pocket costs.
Another item your employees must consider is the enrollment window. Typically, a company healthcare plan specifies a window of time when employees can enroll in the plan. Similarly, the Exchanges have specific periods during the year to sign up. Open enrollment for the federal exchange for 2019 enrollments will run from November 1 through December 15, 2018. Some state-run exchanges may have slightly different enrollment periods.
Typically, the only time an employee can enroll outside of these windows of time is when he or she has a life-changing event, such as a new job, getting married, or having a baby. A life-changing event allows for “special enrollment.”
Only Medicaid has no open enrollment window; those who qualify for Medicaid can enroll at any time.
Your company may offer healthcare coverage not just for your employees, but for their families as well – typically at a higher monthly premium for the whole family than for just the employee.
Many companies will pay a portion of the monthly premium for individual or family coverage, and the employee will pay the remainder – for example, your company may pay 40%, with your employees paying the remaining 60%.
What does that mean to your costs and theirs? Let’s say the premium for employee-only coverage is $300 per month and the premium for family coverage is $800 per month, with the company contributing 40%. The employee will pay a monthly premium of $180 (60% of $300) for self-only coverage and $480 (60% of $800) for family coverage. Your company pays the balance.
Remember, premiums are only part of total healthcare costs. Here are examples of other costs: $25 co-pay for each visit to a doctor; $10 co-pay for every prescription drug; 20% co-insurance for lab work. A trip to the emergency room might cost $150 plus 20% of the total bill for the emergency room service. As you see, the costs can rise quickly.
Above, we briefly mentioned coverage through an Exchange. An Exchange is a government-run marketplace where consumers can buy health insurance for themselves and their families, selecting from plans offered by a number of health insurance companies.
The cost of exchange plans will vary based on the benefits offered. There are Bronze, Silver, Gold and Platinum plans. The higher the metal level, the more expensive the monthly premium, but the greater the benefits. Bronze level plans pay 60% of covered expenses, while Silver plans pay 70%, Gold plans pay 80% and Platinum plans pay 90%. The consumer pays the balance: 40% of expenses for Bronze plans, and only 10% for Platinum plans.
Anyone can buy health coverage from an Exchange. Costs will depend on the metal level of a plan, as well as the consumer’s age and where he or she lives. Coverage through an Exchange may cost your employee less than your company’s health plan.
Another potential healthcare option is Medicaid. A government program, Medicaid pays for comprehensive health care benefits at low or no cost – no premiums, and much lower or no co-pays, deductibles, etc.
Many states have expanded Medicaid eligibility so individuals with higher incomes qualify, and assets are no longer a criterion for eligibility. If your state has expanded Medicaid, the program may be a cost-effective option for your employees to consider.
Another government health program is CHIP, the Children’s Healthcare Insurance Program, which is basically Medicaid for kids. Income limits for CHIP are higher than for Medicaid for adults. So even if the father and/or mother do not qualify for Medicaid because their income is too high, the child may still qualify for CHIP. Similarly, employees covered under your company’s health plan may still be able to enroll their kids in CHIP.
Some of your employees may be veterans or the spouse of a veteran, and qualify for VA or TRICARE coverage, which offers benefits with no or low deductibles and co-pays.
Your employees are likely to need assistance evaluating their healthcare options. You may want to ask your insurance carrier or other advisor to help you prepare for questions such as these:
- How much will I pay if I enroll my family on the company healthcare plan?
- How much will pay if I enroll my family on an exchange plan?
- If my spouse and/or I qualify, how much will I pay to enroll myself and/or my spouse in Medicaid?
- If my children qualify for CHIP, how much will I pay to enroll them?
- How much will I pay in tax penalties for not having healthcare insurance?
- What kind of healthcare benefits do I get with each option?
- How do I compare the different plan options?
With Democrats taking over the majority in the U.S. House of Representatives, it will be interesting to see how the ACA may change. Democrats have said they intend to build upon the progress made by the ACA to provide health insurance to all Americans. Their initial focus will likely be on finding ways to lower insurance premiums, prescription drug prices and out-of-pocket costs for Americans. President Trump has his own ideas about the ACA, and may continue to make administrative changes that impact how the ACA works for employers and employees.
With healthcare being the top issue for most voters in the midterms, it will be interesting to see what, if any, meaningful change may be in store for the ACA. One thing we know for sure, the ACA is not going away.
