The Top Changes to ‘Pay or Play’ for Health Insurance in 2016
As an employer, keeping up with every aspect of your business can be tough – but necessary. Health insurance, in particular, requires notices and other paperwork to be filed throughout the year.
If you’re an applicable large employer (ALE), it’s never too early to begin preparing for the next compliance season.
The phrase ‘pay or play’ is a requirement of the Affordable Care Act that mandates large businesses either ‘play” (provide health insurance to employees) or ‘pay’ (a tax toward a public system that covers people without private insurance).
Under the Health Reform law, a “Large Business” is defined as one with 51 or more full-time equivalent (FTE) employees. If you are a business with 51 or more FTE employees, you are subject to penalties if you fail to offer health insurance (having started in 2015).
Here are a few of the recent pay or play changes that affect your employer shared responsibility, which you may want to consider.
Top Pay or Play Changes in 2016
As the renewal season quickly approaches, you should take a moment to review the provision changes that have occurred in 2016:
- Coverage Thresholds Increased – In 2016, ALEs are liable for a penalty if they:
- Don’t offer health coverage at all, OR
- Offer coverage to less than 95% (formerly 70%) of their full-time employees and at least one full-time equivalent employee receives a premium tax credit, OR
- Offer health coverage to at least 95% (formerly 70%) of their full-time employees but at least one FTE employee receives a premium tax credit.
- Increased Noncompliance Penalties – The annual penalty for ALEs in 2016 that don’t offer coverage or offer coverage for fewer than 95% of their FTE employees is up to $2,160 (formerly $2,080) per each full-time employee minus up to 30 full-time employees. Also, ALEs providing coverage for at least 95% of their full-time employees now face an annual penalty of up to $3,240 (formerly at $3,120) per full-time employees that receive a premium tax credit.
- New Affordability Threshold – If an employee’s share of the employer-provided premium would cost more than 66% (previously 9.56%) of their annual household income, the coverage is considered unaffordable to that employee. Offering unaffordable coverage might subject you to a pay or play penalty.
- Transition Relief Expiration – The 2015 transition relief is now expired for employers with calendar year health plans. If you are an ALE with a non-calendar year health plan, this transition relief coverage continues to apply for any calendar month during the 2015 plan that happens to fall in 2016.
If you would like more information, the Internal Revenue Service has a page on Determining if an Employer is an Applicable Large Employer in addition to other ACA info you might want for your business.
Or, if you want to learn more about pay or play, check out our recent blog on the employer shared responsibility payment.
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