Association Health Plan and Individual Mandate Updates

For employers wishing to participate in an AHP and individuals planning to go uninsured next year...here's what you need to know.

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Published August 27, 2018
 

Association Health Plan Updates 

The Internal Revenue Service (IRS) has revised its frequently asked questions (FAQs) information pertaining to the Employer Mandate. More specifically, the IRS has confirmed that an employer who provides coverage through an association health plan (AHP) has no relevance to the Employer Mandate. An employer isn’t dragged into the Employer Mandate requirements simply because they provide coverage through an AHP. Only employers with 50 or more full-time equivalent employees in the prior calendar year will be subject to the Employer Mandate. Question and answer number 18 from the FAQs is shown below:

Do the employer shared responsibility provisions apply if an employer that is not otherwise an ALE offers coverage through an Association Health Plan (AHP)?

No. Whether an employer member of an association that offers coverage through an AHP is an ALE that is subject to the employer shared responsibility provisions depends on the number of full-time employees (and full-time equivalent employees) the member employer employed in the prior calendar year and is unrelated to whether the employer offers coverage through an AHP. An employer that is not an ALE under the employer shared responsibility provisions does not become an ALE due to participation in an AHP, and an employer that is an ALE under the employer shared responsibility provisions continues to be an ALE subject to the employer shared responsibility provisions regardless of its participation in an AHP. (The only circumstances in which multiple employers are treated as a single employer for purposes of determining whether the employer is an ALE is if the employers have a certain level of common or related ownership.)

Additionally, the Department of Labor (DOL) has issued an ERISA Compliance Assistance guide for employers who wish to participate in an AHP.

While AHPs under the new rules are effective in the fully-insured market as of September 1, 2018, insurance carriers have generally been slow to indicate their appetite for offering AHPs. Most insurance carriers have indicated they are still reviewing the new rules.

Individual Mandate Update

The Individual Mandate penalty under federal law will become $0 starting with the 2019 tax year. That means it’s still on the books for this year. The maximum annualized penalty is the greater of $695 or 2.5% of income. For those that must pay the 2.5% penalty, it is capped at the national average bronze plan premium. The IRS recently released Rev. Proc. 2018-43 which indicates this average is $283 per month per individual ($3,396 annualized) for 2018. The penalty applies up to five family members. Please keep in mind the Individual Mandate penalty is applied on a monthly basis for those who were uninsured for only part of the year and where no exemption can be claimed.