Unlike the Individual Mandate, the Affordable Care Act’s Employer Mandate isn’t going anywhere in 2019. Employers with 50 or more full-time and full-time equivalent employees will still have to offer “affordable” health coverage to avoid ACA penalties. But, there is a sliver of good news. Next year, employers will be able to increase the required employee contribution for coverage under their group health plans.
To satisfy the ACA’s initial affordability requirement, an employee’s required contribution for the lowest cost, self-only coverage could not be more than 9.5 percent of the employee’s household income. However, the initial affordability percentage is adjusted annually by the Internal Revenue Service. In 2019, the affordability percentage will be 9.86 percent.
When compared to prior years, the 2019 affordability adjustment represents the largest percentage increase under the ACA.
We can use the ACA’s affordability safe harbors to translate this percentage increase into dollars and cents. These safe harbors provide various methods for calculating the most an employer can charge employees for the lowest cost, self-only health coverage option without exceeding the ACA’s affordability threshold.
- W-2 Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) who works 40 hours per week for 52 weeks in 2019 will be $123.91 (+ $3.77).
- Rate of Pay Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) in 2019 will be $92.93 (+ $2.83).
- Federal Poverty Line Safe Harbor. Based on the 2018 single individual FPL of $12,140, the maximum monthly contribution in 2019 will be $99.75 (+ $3.03).
These increases may be modest, but they can add up quickly for very large employers. They can also provide some much-needed wiggle room for employers teetering on the edge of unaffordability. The ultimate impact of the 2019 affordability percentage increase can be inconsequential or substantial. Employers will need to reevaluate their cost-sharing structure to find out.
Please contact us if you would like to learn more about ACA-compliant group health plans.