By Rusty von Sternberg
Program Manager for The NIBA Benefits
PPACA Certified & Registered for the Federal Exchanges
ObamaCare. Love it or hate it, one thing is true… the landscape of employer-sponsored health insurance is changing. Many of the Affordable Care Act (“ObamaCare”) provisions strongly favor the individual health insurance market, making “Defined Contribution” the ideal health insurance solution for most (if not all) US employers.
To understand, there are four key ObamaCare changes happening January 1, 2014 that make the shift from defined benefits (group health insurance) to pure defined contribution simply… irresistible.
Guaranteed-Issue Individual Health Plans
Beginning January 1, 2014, insurance carriers must accept all applicants for individual health plans regardless of health status. Individual policies will become guaranteed issue, and eliminate the non-economic (i.e. moral) factors from an employer’s decision-making process. In other words, employers feel assured that sick employees will be able to get affordable individual health insurance coverage through the Marketplaces.
Employer Mandate (Only For Employers with 50+ FTE)
Beginning January 1, 2015, employers with more than 50 full-time-equivalent (FTE) employees must sponsor an “affordable” and “qualified” group health plan, or else the employer may have to pay a tax penalty capped at $2,000 per full time employee. The penalty does not apply to companies with less than 50 FTEs.
Individual Premium Tax Subsidies
Beginning January 1, 2014, if the employer does not offer an “affordable,” “qualified” group health plan, employees may qualify for federal insurance subsidies (based on income) through their state or Federal Health Insurance Marketplace. Individuals with household incomes below 400% of the federal poverty line (approximately 68% of the U.S. population) will receive subsidies that cap their out-of-pocket health insurance expenses as a percentage of income, on a sliding scale (between 2-9.5%). As a result, most employees will be able to obtain identical health coverage on the individual market through their state exchange, at a substantially lower cost than group health insurance.
Beginning January 1, 2014, “qualified” individuals must purchase health insurance, or else pay a tax penalty. The annual fee for not being covered under health insurance will phase in over the first three years, from the greater of $95 or 1% of household income in 2014 (for a single), to the greater of $695 or 2.5% of household income in 2016 (for a single).
For more information on “Defined Contributions” go to my website at http://sales.zanehealth.com/insuranceproductsinc. OR CALL RUSTY VON STERNBERG (281) 444-5412.