How the Health Insurance Mandate Penalty Will Work
Due to expected confusion in the early years of the program, more people may face penalties. But it’s unclear what will happen if they don’t pay them. The ACA forbids the IRS from aggressive efforts to collect the penalty from people who don’t pay. The biggest stick the agency may have is to withhold tax refunds from those who owe penalties.
Insurers are required to send out notices of health coverage that will, over time, become as routine as a taxpayer’s W-2 statement of taxable wages. The 2014 notices are due to consumers and the IRS by Jan. 30, 2015. But this process may experience its own learning curve, and few people are predicting that a flawless reporting system will be in place right away.
The three major parts of the individual mandate rules are 1) understanding the non-financial grounds on which people are excluded from having to get insurance; 2) the income provisions affecting the need to be insured, and 3) the penalties themselves.
The Health-Care Overhaul: A Timeline for Consumers
While some changes have taken effect already, others haven’t—and won’t kick in for years. “For many people, the most important provisions are yet to come,” says Mark Luscombe, a tax specialist at publisher CCH, a WoltersKluwer WKL.AE +1.87% business, which closely tracks changes in federal laws.
Here’s a guide to the status of some of the most notable changes affecting individuals—and their wallets. (Note: Some provisions affect older plans or policies on a different schedule, or not at all.)
4 reasons why dropping coverage isn’t a good idea
No matter how employers want to go about dropping health care benefits, it won’t have any short- or long-term advantages.
To prove this, Truven looked at a few scenarios. The firm examined 33 large employers with more than 900,000 employees in the university, pharmaceutical, retail, financial and manufacturing industries.
They determined that if large employers end up dropping health insurance, they may do it in one of four ways:
- They eliminate group coverage and subsidize the full cost to employees of obtaining coverage through an exchange
- They eliminate group health and subsidize exchange coverage, but without spending any more per employee per year than their current group plan.
- They drop coverage and provide sufficient additional compensation to reduce overall employer health care costs by 20 percent.
- They drop coverage without any additional subsidy to the employee to purchase coverage on their own.
Will Big Companies Drop Health Benefits?
Many such companies considered the idea when the law was enacted in 2010, or even earlier, and rejected it, according to Ryan. “They’ve moved on and are well on to new plan designs and expanding coverage as required by the law,” she says.
But companies have no reason to show their hands now. That’s especially so because timetables for the state-run exchanges, as well as federally operated exchanges that are to be created for residents of states that decline to tap federal subsidies and create their own, are so iffy. Thirty-six states have achieved less than 10% of the 109 milestones toward the establishment of an exchange identified by the National Academy for State Health Policy.
That may mean it’s a long shot that a majority of states will meet a November 16 deadline to indicate whether they plan to set up an exchange and, if so, provide a blueprint demonstrating their readiness in 13 areas so that the exchange will be operational by January 1, 2014, as stipulated in the ACA. That will in turn delay the federal government’s work on creating the state exchanges it will run (which could turn out to be as many as half of them, by some estimates), since the health insurers that will participate in the exchanges will vary from state to state.
What the Court’s Ruling Means for Consumers
The Supreme Court said Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty. It upheld the mandate as a tax, in an opinion by Chief Justice John Roberts.
But the justices found fault with part of the health-care law’s expansion of Medicaid, a joint federal-state insurance program for the poor. The justices made some changes to the Medicaid portion of the law.
Health Care Reform Could Prompt Earlier Retirement
July 13, 2012 — Provisions of the Patient Protection and Affordable Care Act (PPACA) could cause employees to retire earlier because of health care coverage available after leaving their companies. —
Many employees have accumulated enough wealth to stop working but do not have adequate health care savings for retirement, Brad Kimler, executive vice president of benefits counseling at Fidelity, said during a Fidelity webinar hosted by PLANSPONSOR.
The legislation could particularly benefit employees ages 55 to 64 who may be contemplating retirement but are not yet eligible for Medicare, Mike Thompson, principal of human resource services at PwC, told PLANSPONSOR. In addition, this age group may have previously had trouble finding coverage because of pre-existing conditions, he said.
With health care coverage made easier, employers may need to provide alternative incentives—such as phased retirement—to keep their staff, said Arthur Noonan, senior retirement consultant at Mercer. Companies may not want employees to retire earlier if knowledgeable staff will be lost, he said.
On the other hand, some employers may be delighted about the PPACA because it gives employees more confidence that they can afford health care during retirement, Noonan said. It also could save companies money if the reform prompts them to stop offering retiree medical benefits. Companies providing retiree medical could still provide employees with an allowance but direct them to the exchanges, he said.
“In general, employers are still trying to figure out how to afford health care,” Thompson said. “This could provide an easier way to save.”
The Legal LanguageSecurities offered through Lockton Financial Advisors, LLC a registered broker-dealer and member FINRA, SIPC. Investment advisory services offered through Lockton Investment Advisors, LLC, a SEC registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.
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