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2024 ACA Pay or Play Increasing Penalties

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On March 9, 2023, the IRS revised the penalty amounts for the employer shared responsibility (pay or play) rules under the Affordable Care Act (ACA) for 2024. For the calendar year 2024, the adjusted $2,000 penalty amount is $2,970, and the revised $3,000 penalty amount is $4,460.

 

Pay Or Play Penalty

An applicable large employer (ALE) that complies with the pay or play regulations is only subject to penalties if at least one full-time employee receives a subsidy for Exchange coverage. Employees provided affordable minimum value (MV) coverage must be qualified for these Exchange subsidies. Based on the circumstances, the pay-or-play rules allow for applying either the 4980H(a) penalty or the 4980H(b) penalty.

 

  • Under Section 4980H(a): If an ALE does not provide coverage to typically at least 95% of its full-time workers (and dependents), and any full-time worker obtains a subsidy toward their Exchange plan, the ALE will be subject to a penalty. For any applicable month, the monthly fine imposed on ALEs that do not provide coverage to almost all full-time employees and their families equals the number of full-time employees at the ALE (minus 30), multiplied by 1/12 of $2,000 (as adjusted).

 

  • Under Section 4980H(b): If at least one full-time employee receives a subsidy through an Exchange due to the ALE not providing coverage to all full-time employees, the ALE’s coverage being prohibitively expensive, or the ALE’s coverage not providing MV, the ALE may still be subject to a penalty even if it offers coverage to nearly all full-time employees (and dependents). For each full-time employee who receives a subsidy, an ALE is subject to a monthly fine equal to 1/12 of $3,000 (as adjusted) for any applicable month. Nevertheless, the 4980H(a) penalty amount is the maximum punishment for an ALE.

 

Important Dates Description
August 16, 2022 For 2023, the IRS published revised pay-or-play penalty amounts.
March 9, 2023 For 2024, the IRS published revised pay-or-play penalty amounts.
2024 Calendar year 2024 penalty amounts are based on a failure to provide affordable minimum value coverage during the 2024 calendar year

 

IRS Pay Resources

The following IRS websites are available to employers for more information and updates regarding. pay or play provisions:

 

 

This ACA Pay Penalty Outline is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.

 

*sourcehttps://content.zywave.com/file/b1f47fcf-ae5c-4d8a-a1b2-1d74f01159e9/ACA%20Pay%20or%20Play%20Penalties%20Will%20Increase%20for%202024.pdf *

Benefits of a Grandfathered Plan

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Grandfathered Plan Overview

The grandfathered plan was created on March 23, 2010, with few changes implemented since then. Plans with grandfathered status are exempt from some Affordable Care Act (ACA) regulations, but if that status is lost, the plan must adhere to more ACA criteria. An attempt by employers to scale back the benefits of plans or raise participant expenses will result in the loss of grandfathered status. So, it is essential to note that employers are limited in what changes they can make to grandfathered plans’ benefits and costs. It is also important to note that an employer can decide it makes sense to give up the plan’s grandfathered status and adhere to the new ACA standards to make more significant changes to its health plan.

 

Grandfathered Health Plans are exempt from the following ACA requirements:

Coverage of Preventive Health Services

For plan years beginning on or after September 23, 2010, certain preventive health care must be covered by company health plans and group or individual health insurance policies without requiring cost-sharing requirements. In addition, for years beginning on or after August 1, 2012, preventative health treatments for women must be offered without cost-sharing.

 

Patient Protections (for plan years beginning before January 1, 2022)

The ACA requires the following patient protections that are effective for plan years beginning on or after September 23, 2010:

  • Any primary care physician, including a pediatrician for children, who are available and participates in the plan or network must be available to enrollees.
  • Emergency services provided by group health plans and group or individual health insurance policies are not subject to increased cost-sharing or pre-authorization restrictions.
  • For OB/GYN care, corporate health plans and individual or group health insurance policies may not demand preauthorization or referral.

*For plan years beginning on or after January 1, 2022, the No surprise act (NSA) has expanded the ACA’s patient protection, which applies to protections for patients under health plans with grandfathered status.*

 

Nondiscrimination Rules for Fully Insured Plans

Once regulations are issued, fully insured plans must comply with section 105(h)(2) of the Internal Revenue Code. According to that clause, a plan and the benefits provided in the plan may not favor highly compensated people when determining who is eligible to participate.

 

Quality of Care Reporting

Reporting requirements will be implemented for group health plans and health insurance providers who provide group or individual health insurance coverage. The reports will deal with benefit and payment plans that are intended to enhance patient safety, lower medical errors, avoid readmissions to the hospital, and implement wellness programs.

 

Improved Appeals Process

For plan years starting on or after September 23, 2010, group health plans and health insurance providers that provide group or individual health insurance coverage must strengthen their internal appeals procedures and adhere to minimum standards for external reviews.

 

Insurance Premium Restrictions.

Premiums for health insurance coverage in the individual or small group market may not be discriminatory. They may differ solely by individual or family coverage, rating region, age, and tobacco use for plan years beginning on or after January 1, 2014.

 

Guaranteed Issue and Renewal of Coverage

For plan years starting on or after January 1, 2014, health insurance issuers that provide health insurance coverage in a state’s individual or group market must accept every employer and person who applies for coverage in the state. They also must renew or continue the coverage at the individual’s or plan sponsor’s discretion.

 

Nondiscrimination in Health Care

Group health plans and health insurance providers that provide group or individual insurance coverage may not discriminate against any provider practicing within their scope of practice as of January 1, 2014, or for plan years beginning on or after that date. This clause, however, does not mandate that a plan only work with agreeable providers or forbid tiered networks. In addition, plans and issuers are prohibited from treating people differently based on whether they accept subsidies or assist an inquiry under the Fair Labor Standards Act.

 

Comprehensive Health Insurance Coverage

For plan years beginning on or after January 1, 2014, health insurance issues that offer group or individual health insurance coverage need to provide the minimum set of benefits demanded of policies sold through health insurance exchanges.

 

Limits on Cost-Sharing.

For their coverage of essential health benefits, plan years starting on or after January 1, 2014, must employ a cost-sharing limit (total yearly limit) for solo and family coverage.

 

Coverage for Clinical Trials

For plan years beginning on or after January 1, 2014, group health plans and health insurance providers providing group or individual insurance coverage must allow certain enrollees to participate in specific clinical trials, with the recurring costs covered for participation. In addition, discrimination against the enrollees for the trial is prohibited.

 

Key Considerations for Employers

At each renewal, employers will need to decide whether to renew with their current Grandfathered plans or make changes to ACA plans.  It is important to know that once an employer no longer offers a Grandfathered plan or moves to a new carrier, the employer can no longer go back to the Grandfathered status. It is important to weigh all of your options, the pros and cons, at your renewal period.

If you are an employer, who still has Grandfathered plans, and are interested in a second opinion or evaluation of your benefits, please contact MNJ Insurance Solutions at (714) 716-4303 ext. 102 or sales@mnjinsurance.com.

 

This Grandfathered Plan Overview is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.

 

*source:https://content.zywave.com/file/4180adb7-d393-4c8f-9210-f99b31832eb8/Health%20Care%20Reform%3A%20What%20Are%20the%20Benefits%20of%20Having%20a%20Grandfathered%20Plan%3F%20.pdf *

2023 ACA Pay or Play Increasing Penalties

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On August 16, 2022, the IRS revised the penalty amounts for the employer shared responsibility (pay or play) rules under the Affordable Care Act (ACA) for 2023. For the calendar year 2023, the adjusted $2,000 penalty amount is $2,880, and the revised $3,000 penalty amount is $4,320.

 

Pay Or Play Penalty

An applicable large employer (ALE) that complies with the pay or play regulations is only subject to penalties if at least one full-time employee receives a subsidy for Exchange coverage. In general, employees provided affordable minimum value (MV) coverage are not qualified for these Exchange subsidies. Based on the circumstances, the pay-or-play rules allow for applying either the 4980H(a) penalty or the 4980H(b) penalty.

 

  • Under Section 4980H(a): If an ALE does not provide coverage to around 95% of its full-time workers (and dependents), and any full-time worker obtains a subsidy toward their Exchange plan, the ALE will be subject to a penalty. For any applicable month, the monthly fine imposed on ALEs that do not provide coverage to almost all full-time employees and their families equals the number of full-time employees at the ALE (minus 30), multiplied by 1/12 of $2,000 (as adjusted).

 

  • Under Section 4980H(b): If at least one full-time employee receives a subsidy through an Exchange due to the ALE not providing coverage to all full-time employees, the ALE’s coverage being prohibitively expensive, or the ALE’s coverage not providing MV, the ALE may still be subject to a penalty even if it offers coverage to nearly all full-time employees (and dependents). For each full-time employee who receives a subsidy, an ALE is subject to a monthly fine equal to 1/12 of $3,000 (as adjusted) for any applicable month. Nevertheless, the 4980H(a) penalty amount is the maximum punishment for an ALE.

 

 

Important Dates Description
August 16, 2022 For 2023, the IRS published revised pay-or-play penalty amounts.
March 1, 2022 Prior to this, the IRS updated the 2023 affordability percentage to 9.12%
2024 Calendar year Updates are based on coverage offered during the 2023 calendar year

 

This ACA Pay Penalty Outline is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.

 

*source:https://content.zywave.com/file/b1f47fcf-ae5c-4d8a-a1b2-1d74f01159e9/ACA%20Pay%20or%20Play%20Penalties%20Will%20Increase%20for%202024.pdf *

 

2021 ACA Pay or Play Penalties Increase

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On August 19, 2020, the IRS updated its Pay or Play Frequently Asked Questions to include the annual adjusted penalty amounts for the 2021 calendar year.

When the Affordable Care Act was first implemented, there were two penalties for the Pay or Play, 4980H(a) penalty and the 4980H(b) penalty for Applicable Large Employers, also referred to as an “ALE.”

  • The Section 4980H(a) penalty can apply when an ALE, does not offer group health insurance to “substantially all” full-time employees (and dependents). The penalty is calculated as ALE number of full-time employees (minus 30) x $2,000 (as adjusted).

 

  • The Section 4980H(b) penalty can apply when an ALE does not offer coverage to all full-time employees or the ALE’s coverage is unaffordable or does not provide minimum value, and the employee receives an Exchange subsidy. The penalty is calculated as $3,000 (as adjusted) x the number of ALE’s full-time employees who receive an Exchange subsidy.

 

  • For 2021, the adjusted 4980H(a) $2,000 penalty amount is $2,700.
  • For 2021, the adjusted 4980H(b) $3,000 penalty amount is $4,060.

 

Employers with 50 or more full time equivalent employees, also known as Applicable Large Employers (“ALE”), should keep these penalty amounts in mind when reviewing benefit eligibility and employer contributions for 2021 calendar year to avoid penalties.

 

For more information, contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.