With the new tax bill, the individual health insurance mandate still exists. However, starting in 2019, the penalty will be $0. How will this affect you, your family, and your business?
First, it is important to understand the 2 scenarios for the purchase of individual health insurance:
- Individual qualifies for federal premium subsidies
- Individual does NOT qualify for federal premium subsidies
Let's consider those 2 scenarios is more detail. In the following example, we are assuming a household of 2 (husband and wife both age 40 with no children) residing in Florida.
Scenario 1): Household income of $50,000 which qualifies for premium subsidy.
The net cost of health insurance to this individual is a percentage of household income (not the actual premium). Example: 6% of the $50,000 2-person household annual income or $3,000 annually (even if the actual premium is $10,000). If the insurance premium increases, the individual's costs does NOT increase since it is capped at a percentage of the household income.
Scenario 2): Household income of $75,000 which does NOT qualify for premium subsidy.
The couple will be responsible for the entire health insurance premium (for example, $10,000 annually for a 2-person insurance plan). This 2 person household is paying the entire premium of $10,000 annually or 13% of their total income.
If you are in Scenario 2 - do you buy health insurance at $10,000 per year?
(Keep in mind the average 2-person deductible for an individual plan is over $8,000 per year).
Important Note: In 2016, 8.6% of Americans or 27.3 million individuals were uninsured.
They chose not to buy from the ACA individual health insurance market.
Only 12.7 million Americans purchased health insurance from the ACA marketplace.
And now - the BIG question: Under scenario 2, (where the couple does not qualify for federal premium subsidies), would this husband and wife buy a "non-compliant" and lower-priced health plan that does not comply with the ACA (or Obamacare rules) since the penalty is now $0?
- For example, this couple could buy a low-priced indemnity plan for only $2,400 per year (75% less than the ACA plan) that would cover such expenses as accidents, critical illness, office coverage, preventive care, generic prescriptions, emergency room, and outpatient treatments. This plan would not be adequate for large catastrophic bills but it would pay for every day health costs up to defined amounts (for example, $20,000 annually).
- This plan is NOT compliant with the rules of the Affordable Care Act.
- However that no longer matters since the penalty is $0.
Is this type of coverage better than no coverage at all?
And should you (the employer sponsor this coverage) since it is affordable?
An employer could sponsor a group indemnity plan with solid benefits, and let the employee buy-up for even more coverage. This would be very affordable for the employer, and would provide real benefits to the employee. As low as $50 per month per employee would be buy solid coverage.
An additional $10 per weekly payroll deduction would increase those benefits.
These types of plans are actually available today - Learn more.
Perhaps, these plans become even more viable once the mandate is eliminated.
But they are available today in most states.
First dollar coverage for accident, inpatient, critical illness, office, and more.