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Health Coverage requirement

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Requirements beginning in 2014

The requirement for individuals to have health coverage was part of the overall health reform package that provides subsidies to make coverage more affordable. This provision requires insurers to cover everyone, regardless of health status or history. Without the requirement to have health coverage, people with health problems are more likely to get health insurance while others would forgo insurance until they get sick. 

If healthy people don’t buy coverage, there would be only a small number of very expensive coverage choices available. The requirement to buy health coverage makes sure people don’t wait until they have a health problem to purchase insurance. This brings healthy people into the pool, creates a larger pool of both sick and healthy individuals, and keeps average costs down. 

While employers aren’t required to offer health insurance to employees, most employers with more than 50 employees will pay an assessment if they don’t offer affordable coverage that covers minimum essential health benefits

Does health reform require me to purchase coverage?

 Effective Jan. 1, 2014, all U.S. citizens and legal residents will be required to obtain health insurance coverage.

 

What happens if I do not buy coverage?

Those who do not obtain coverage will pay a tax penalty beginning in 2014. The penalty is set to increase each year as follows: 

In 2014, it will be the greater of $95 per adult or 1 percent of taxable income.

In 2015, it will be the greater of $325 per adult or 2 percent of taxable income.

In 2016, it will be the greater of $695 per adult or 2.5 percent of taxable income.

After 2016, the tax penalty increases annually based on a cost-of-living adjustment.

A person will only pay one-twelfth of the total annual penalty for each month without coverage.

The penalty for a child is half that of an adult.

A maximum penalty would be calculated based on premiums for plans offered through an Exchange.
 

Will there be any exceptions?

Yes. The law provides exceptions for:
1) Individuals and families below a certain income
2) People who cannot afford the coverage that is available
3) Individuals who have been uninsured for less than three months
4) Members of American Indian tribes
5) People who do not obtain coverage because of religious objection.

Why does health reform require people to have health insurance coverage?

The requirement for individuals to have health insurance coverage was part of the overall health reform package that provides subsidies to make coverage more affordable. This provision requires insurers to cover everyone, regardless of health status or history. Without the requirement to have health coverage, people with health problems are more likely to get health insurance while others would forgo insurance until they develop a health condition. 

If healthy people don’t buy coverage, there would be only a small number of very expensive coverage choices available. The requirement to buy health coverage makes sure that people don’t wait until they have a health problem to purchase insurance. This brings healthy people into the pool, creates a larger pool of both sick and healthy individuals, and keeps average costs down. 

Does health reform require me to purchase coverage?

 Effective Jan. 1, 2014, all U.S. citizens and legal residents will be required to obtain health insurance coverage.

What happens if I do not buy coverage?

Those who do not obtain coverage will pay a tax penalty beginning in 2014. The penalty is set to increase each year as follows: 

In 2014, it will be the greater of $95 per adult or 1 percent of taxable income.

In 2015, it will be the greater of $325 per adult or 2 percent of taxable income.

In 2016, it will be the greater of $695 per adult or 2.5 percent of taxable income.

After 2016, the tax penalty increases annually based on a cost-of-living adjustment.

A person will only pay one-twelfth of the total annual penalty for each month without coverage.

The penalty for a child is half that of an adult.

A maximum penalty would be calculated based on premiums for plans offered through an Exchange.

Will there be any exceptions?

Yes. The law provides exceptions for:
1) Individuals and families below a certain income
2) People who cannot afford the coverage that is available
3) Individuals who have been uninsured for less than three months
4) Members of American Indian tribes
5) People who do not obtain coverage because of religious objection.

Why does health reform require people to have health insurance coverage?

The requirement for individuals to have health insurance coverage was part of the overall health reform package that provides subsidies to make coverage more affordable. This provision requires insurers to cover everyone, regardless of health status or history. Without the requirement to have health coverage, people with health problems are more likely to get health insurance while others would forgo insurance until they develop a health condition. 

If healthy people don’t buy coverage, there would be only a small number of very expensive coverage choices available. The requirement to buy health coverage makes sure that people don’t wait until they have a health problem to purchase insurance. This brings healthy people into the pool, creates a larger pool of both sick and healthy individuals, and keeps average costs down. 

I am a small employer with less than 50 full-time employees. Does health reform contain a mandate requiring me to provide health insurance to my employees?

No.  Health reform does not require small employers to provide insurance for employees.  Small employers will also not be required to pay an assessment if they do not provide affordable health coverage to their employees.  However, health reform does provide for a small business health care tax credit for small employers that choose to provide insurance to their employees.  The IRS has published details on the new small business tax credit on its website (IRS.gov).

I have heard that employers are going to have to pay a penalty if they do not provide coverage for their employees. Is that true if I am a small employer?

No. While there are penalties in certain situations for larger employers, small employers with fewer than 50 full-time or full-time equivalent employees are not subject to the penalties.

I have 75 employees. Will I be required to provide insurance for my employees?

Employers don’t have to offer their employees health insurance coverage, but most of them with more than 50 full-time employees will pay an assessment if they don’t offer coverage, or if they offer coverage that isn’t affordable.

Employers with 50 or more full-time or full-time equivalent employees that do not offer minimum essential coverage would pay $2,000 for each employee over the first 30 employees, if one of their employees gets a tax subsidy to buy insurance under an Exchange.

Employers with 50 or more full-time or full-time equivalent employees that do offer minimum essential coverage, but have at least one full-time employee receiving subsidized coverage under an Exchange, would pay whichever is less: $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee.

I am a large employer with more than 50 full-time employees. I do offer my employees health coverage. I have always made sure that the coverage is comprehensive so I am not worried about having the minimum essential coverage. However, I understand that large employers may still be assessed if the coverage I offer is unaffordable and my employees seek subsidized coverage in an Exchange. How do I know if the coverage I offer is affordable?

Coverage under an employer-sponsored plan is affordable to a particular employee if the employee’s required contribution does not exceed 9.5 percent of the employee’s household income for the taxable year.

As an employer, I don’t know the household income of my employees. I only know the wages I pay each employee. How will I know if I need to pay an assessment because my large employer health plan is unaffordable for my employees?

The U.S. Department of Treasury and the Internal Revenue Service (IRS) expect to propose a safe harbor permitting large employers that offer coverage to their employees to measure the affordability of that coverage by using wages that the employer paid to an employee, instead of the employee’s household income. This safe harbor would only apply for purposes of calculating the employer assessment. It would not affect employees’ eligibility for health insurance premium tax credits.

The IRS has posted a request for comments in order to get public input and comments on the proposal.  Comments are due by December 13, 2011.

Will I be required to drop my current coverage?

No. Employer-based health plans in effect as of March 23, 2010, are grandfathered under the law. Grandfathered plans will fulfill the individual requirement to have health insurance that begins in January 2014. Employees and dependents can be added to the policy without losing grandfathered status.