July 02, 2019
The California state legislature has voted to institute a requirement for individuals to have health insurance, or pay a penalty. The bill has been presented to, and approved by, the Governor. This penalty, which had been a key component to the federal Affordable Care Act (ACA), was reduced to zero effective January 1, 2019 as part of the Tax Cut and Jobs Act of 2017. Under the ACA, up until this year, most individuals had been required to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This provision was referred to as the "Individual Mandate" because it had the effect of requiring individuals to have health coverage.
The California legislation, known as SB 78, is actually an omnibus health trailer bill containing many changes to implement the state's 2019-2020 budget. Among these changes is a provision to implement an individual mandate penalty for individuals that fail to purchase minimum essential coverage during the year. The bill also establishes a program within Covered California (the State's health benefit Exchange) referred to as Individual Market Assistance, to subsidize the premium payments of those making under 600 percent of the federal poverty level.
California will join Massachusetts, New Jersey, Vermont and Washington, D.C. in having an individual mandate requirement.
For every month on or after January 1, 2020, California residents will be required to maintain minimum essential coverage or pay a penalty. While not specifically stated, since the intent of the legislation is to reimpose the federal individual mandate penalty, it appears the penalty amounts would mirror those stipulated under the ACA ($695 per individual).
Exemptions would be available to several classes of residents, including the following:
SB-78 also includes a provision for Individual Market Assistance for the next three years (until January 1, 2023) that would be authorized to provide health care financial assistance to California residents with household incomes at or below 600 percent of the federal poverty level, including advance premium assistance subsidies. This would be funded by revenue received from the Individual Mandate.
Both the State and Covered California will have the authority to ensure the minimum essential coverage mandate is properly implemented. While employees will be required to attest to having insurance on their personal tax returns, it is quite possible employers and/or insurance carriers will be required to file an annual report of their health insurance enrollees with the State. Because of the reduction of the ACA individual mandate to zero, it is unclear whether the current Forms 1094-B and 1095-B will continue to be required at the Federal level. If not, the State and/or Covered California may need to step in and develop an alternative reporting mechanism that mirrors the Forms 1094-B and 1095-B that are currently required under Federal law.
Depending on the industry, this could also be seen as an incentive for some employers to offer a form of minimum essential coverage to their non-full time employees to remain competitive in the marketplace.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
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