Affordability Safe Harbors
The safe harbor percentage for 2019 is 9.86% (IRS per Rev. Proc. 2018-34). The safe harbor percentage for 2020 is 9.78% (IRS per Rev. Proc. 2019-29).
Employer Shared Responsibility Tax (employer mandate) – applicable to the 2018 plan year
4980(a) tax for not offering minimum essential coverage to at least 95% of full-time eligible employees: For 2018, the ESRP is $2,320 per all full-time eligible employees (less 30 full-time eligible employees). $193.33 per all full-time eligible employees (less 30 full-time eligible employees) monthly. Final numbers for 2019 have yet to be released, but this tax is projected to be approximately $250 per month higher for 2019.
4980(b) tax for not offering coverage that is not minimum value or not affordable to an eligible full-time employee: For 2018, the ESRP is $3,480 for each eligible employee not offered such coverage. $290 per affected employee monthly. Final numbers for 2019 have yet to be released, but this tax is projected to be approximately $380 high for 2019.
Fee due July 31, 2019
Fee due July 31, 2020
Selecting a Benchmark Plan – still a requirement for 2020
The final Market reform rules require self-insured and large insured plans to “select” one of the three Federal Employees Health Benefit Program (FEHBP) options or a state benchmark plan to define essential health benefits (EHB) for purposes of ensuring the plan imposes no annual or lifetime dollar limits on EHBs
This requirement applies to benefits provided in or out-of-network.
Applicable to plans renewing or beginning on or after January 1, 2017.
Health Insurance Providers Fee
The Health Insurance Providers Fee was suspended for 2019. It is set to be applicable in 2020. Tax deductible to employers if it is part of the premium. The estimated impact 2.5% to 3% of premium.
- Insured individual and group medical plans
- Stand-alone, insured dental and vision plans
- Stand-alone, insured behavioral health and pharmacy plans
- Medicare Advantage plans • Retiree-only plans • Part D prescription benefit plans
- Medicaid (and CHIP) programs
- Taft-Hartley Plans to the extent the plans meet the other criteria for inclusion
- Self-funded employer sponsored group health plans [Note: Some benefits may be covered under an insured plan and therefore subject to this fee as well.]
- Non-profit corporations that receive more than 80% of their revenue from government sponsored poverty programs (Medicaid, CHIP) and that comply with certain restrictions on political activity
- Medicare supplemental coverage that meets the requirements of section1882 (g)(1)
- VEBAs sponsored by an entity other than an employer or employers
- Coverage for specific diseases or hospital indemnity coverage
- Accident-only coverage
- S.-issued expatriate plans after 2015
Incentive and reward limits
- Participation-only programs (e.g. fitness club discounts): unlimited
- Outcomes-based: Tobacco cessation 50% of employer + employee premium contribution. All other programs (e.g. biometrics) 30% of employer + employee premium contribution. Note, if combined, the total can be no more than 50% of employer + employee premium contribution, with any percentage over 30% being attributable to tobacco cessation.
ADA – NOTE
- A federal district court vacated key provisions of the EEOC’s wellness program rules, effective Jan. 1, 2019.
- Employers should be careful about structuring incentives for wellness programs that ask for health information or involve medical exams.
- It is possible that the EEOC will issue new wellness rules prior to 2020.
- Applies to incentives linked to the spouse or children of an employee participating in a medical exam or providing information regarding current or past health status: the maximum inducement to the employee is 30% of the employee only rate and if the spouse can participate, 30% of the employee only rate. The family rate is not considered.
States Implementing Individual Health Coverage Mandates
Note: Minnesota, Washington, Connecticut and Rhode Island appear to be considering individual mandates.
DISCLAIMER: This information is provided for general purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Readers and participants are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise. Any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the U. S. Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter. 06-05-2019