The Affordable Care Act Update – What Levels of Coverage Meet the Comprehensive and Affordability Criteria?

(Part 2 of a 3- part blog series)

Next January, this country’s healthcare system will undergo a massive change, when a large portion of the mandates found in the Patient Protection and Affordable Care Act*  take effect.  This is daunting and confusing for many employers – mainly because the amount of information is scarce, while the number of opinions and amount of misinformation is huge.  During the month of June, Snelling is looking to help.

*NOTE:  The Patient Protection and Affordable Care Act is also known by its abbreviated form – Affordable Care Act and as “Obamacare”.  

Part 2 of our 3 part series deals with one of the most confusing aspects of the ACA’s employer mandate – the idea of affordability and comprehensiveness.

But your first question might be “what is the employer mandate?”  Well, as part of healthcare reform, beginning in January 2014, companies with more than 50 full-time equivalent employees will be required to either provide affordable and comprehensive health insurance or pay penalties.   

Once you determine that you…

1)      have over 50 full-time equivalent employees

2)      will provide some level of healthcare coverage

…you need to consider whether or not the healthcare plan you intend to offer satisfies the thresholds for comprehensiveness and affordability, such that you will avoid a penalty of $3,000 for every employee who leaves your program and receives subsidized coverage from a health insurance exchange.

*For more information on “pay” or “play” please see our last blog post entitled The Affordable Care Act – Demystified

But what satisfies the comprehensive and affordability criteria?  Well, according to the language of the ACA, to determine comprehensiveness and affordability, three conditions must be met.  The employer must offer health coverage:

1. …to at least 95% of full-time employees and their dependents (but not spouses) under the age of 26.  This coverage – called minimum essential coverage – must be more comprehensive than a healthcare flexible spending account (FSA) or simple dental/vision insurance.
2. …that meets a “minimum value” standard, by providing an “actuarial value” of at least 60%.  This means that it must also cover at least a 60% share of the enrollee’s overall medical expenses.
3. ….is affordable.  Coverage is deemed affordable if “employee-only” coverage costs the employee less than 9.5% of his/her modified adjusted gross income (MAGI). In other, specific situations, employee-only coverage is affordable if it does not exceed
   1. 9.5% of the employee’s hourly rate of pay (as of the first day of the coverage period) multiplied by 130 hours.
   2. 9.5% of the most recently published Federal Poverty Line (FPL) as of the first day of the plan year.  Employers must use the FPL applicable to the state in which the employee is employed.

Sign up for our RSS feed during the month of June to stay up-to-date. This month, our weekly blog will provide information on the ACA – information that you can use. The wording and language used in both the law and the updates are extremely complex….we are here to help.  So sign up and stay tuned for more installments of our ACA updates in the Snelling Blog!