Tuesday, January 9, 2018

What the Repeal of the Individual Mandate Means for Employers

One of the biggest pieces of news out of last month’s tax reform bill was the repeal of the Affordable Care Act’s individual mandate. The individual mandate requires each person to have health insurance, and imposes a fine of 2.5% of the person’s total household income or $695, whichever is greater, if an individual does not maintain health insurance. The individual mandate will remain in effect throughout 2018, with 2019 being the first year that individuals are not required to purchase health insurance. Many expected the Republican-controlled Congress to do away with the requirement that employers with more than 50 employees offer health insurance plans to all full-time employees, but Congress never was able to repeal that section of the Affordable Care Act, and they do not seem to have any plans to do this in 2018.

While the employer mandate remains, the repeal of the individual mandate will undoubtedly still affect employers. It is possible that fewer employees will enroll in employer-provided healthcare plans since they are no longer required to maintain health insurance. It is also possible that employer-sponsored health insurance premiums will increase, since younger, healthier people will be less likely to purchase insurance with the individual mandate repealed.

It is possible that some states that already have set up exchanges under the Affordable Care Act, like California and Illinois, will pass their own individual mandates in an effort to shore up these exchanges. In 2006 Massachusetts passed a law requiring individuals to purchase health insurance, so there is some precedent for states doing this.

It is still possible that the employer-mandate will be repealed this year. The individual mandate and the employer mandate were meant to go hand-in-hand, as the individual mandate would increase participation in employer plans and provide them with a healthier pool of people to subsidize the sick. The end of the individual mandate may lead to a push to end the employer mandate as well, especially if the premiums for employer-sponsored plans increase due to the repeal of the individual mandate. This may also be the case if the penalties for failing to provide plans in compliance with the ACA hammer employers. 2017 was the first year that the IRS penalized companies for failing to offer insurance in compliance with the ACA.

Significant changes to the health care laws take place all the time, so I encourage you to tune into our blog to stay informed of them. Also, feel free to contact me with questions about how the repeal of the individual mandate will affect you and your employees.