Affordable Care Act and Employer Paid Medical Insurance

We are coming to the end of the penalty relief period (June 30, 2015) from the $100.00 per day per employee for any employer which has a employer payment plan which does not comply with the Affordable Care Act’s market reforms.  This relief period was to help those employers who have less than 50 employees.

The IRS in Notice 2013-54 sets forth that the Affordable Care Act’s market reforms apply to all ‘group health plans‘ and “employer payment plans’ which it defines to include plans where “an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy…or arrangements under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee.”

The Notice indicates that the market reforms do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year.

In Notice 2015-17 reaffirmed the definition of group health plan from Notice 2013-54 and also noted “arrangements constituting employer payment plans fail to comply with the market reforms….”  These arrangements will subject the employer to the $100.00 per day per employee penalty.  A relief period ending June 30, 2015 was granted to give the employer time to obtain a plan that meets the Affordable Care standards.

Notice 2015-17 does provide a way to avoid the penalty. (1) discontinue any existing employer payment plan and (2) establish a plan that increases the employee’s compensation, “but does not condition the payment of the additional compensation on the purchase of health coverage (or otherwise endorse a particular policy, form or issuer of health insurance).”

Unless Congress and the President do something to change the law, employers can expect to change how they are handling things or face the $100.00 per day per employee fine beginning July 1, 2015.  Govern yourselves accordingly.

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