July 24th, 2018
NJ Individual Mandate
How Self-Insured Health Plans Can Help You Avoid State Mandate Penalties
New Jersey is the second state to re-impose an individual mandate following the Congressional repeal under the passage of the Tax Cuts and Jobs Act.
The individual mandate has been a key pillar of the Affordable Care Act (ACA) since its inception. The mandate requires individuals to maintain health benefits that meet the definition of minimum essential coverage (MEC) or pay a tax penalty of either 2.5 percent of adjusted household income or $695 per adult and $347.50 per child under 18 (capped at $2,085), whichever is greater.
As part of the passage of the Tax Cuts and Jobs Act, the federal individual mandate will be repealed beginning January 2019.
In late May, New Jersey Governor Phil Murphy signed into law a bill that effectively reinstates the individual mandate for New Jersey residents beginning January 2019. New Jersey lawmakers feared that lack of an individual mandate would drive healthier people away from the ACA exchanges, causing premiums to increase.
“In late May, New Jersey Governor Phil Murphy signed into law a bill that effectively reinstates the individual mandate for New Jersey residents beginning January 2019."
Senator Joe Vitale (D-Middlesex), the prime sponsor of the bill, claimed “The individual market would descend into a death spiral if not for this legislation. This helps to keep people insured and keeps that market healthier."
New Jersey is the second state to re-impose an individual mandate following the Congressional repeal. Massachusetts has enforced an individual mandate since 2006, and Vermont has also begun the process of creating similar legislation to be enacted in 2019. However, several other states are considering similar reinstatement of the individual mandate in order to protect their insurance markets.
Minimum essential coverage (MEC) is exactly that; it comprises 71 wellness and preventative service with no out-of-pocket costs in the form of deductibles, copays or co-insurance to the participant. MEC Plus and MEC Enhanced plans combine coverage of those preventative services with frequently utilized essential health benefits (EHBs) and telemedicine, but do not include services related to inpatient or outpatient hospital services, maternity care, certain prescription medications, mental health or substance abuse treatment.
MEC plans enable individuals to obtain coverage and avoid the penalties, but at a far more affordable cost than comprehensive ‘major medical’ or ‘metal’ plans. However, MEC is not currently available as a fully insured product to individuals on the insurance exchanges; i.e.; traditional plans paid for by annual premiums direct to the carrier.
MEC is available, however, as an employer sponsored self-insured group benefit, which can be obtained through employers. Employers with more than 50 full time eligible employees are still required to offer affordable group health coverage in accordance with the ACA’s Employer Mandate.
Both small group and midmarket companies can offer competitive benefits via a suite of self-insured plans, and ensure their employees avoid individual penalties for lack of coverage once state mandates go into effect at the beginning of next year, while simultaneously maintaining ACA Employer Mandate compliance. And they can do so at a considerable cost savings to themselves as well.
Self-funded insurance plans entail business owners paying for each employee claim out of pocket, as they occur, rather than paying monthly premiums. Employers collect payroll contributions and match them as they would with fully insured plans; however, these funds are usually held in a dedicated claims reserve account, which enables businesses to not only save on state premium taxes, but to keep any funding reserves that are not paid out for medical claims and, which would otherwise be paid to the fully-insured carrier.
By opting for self-insured health plans, employers can ensure compliance with state regulations, while providing the right coverage for their employees’ unique needs. This flexibility allows small and midmarket businesses to maintain a competitive benefits package regardless of constantly shifting federal and state healthcare policies, saving money not only on premiums but also on penalties.
Ultimately, as regulations continue to shift, employers of all sizes need a way to stay in compliance without affecting the quality of the coverage they can offer their employees, and without subjecting themselves or the employees to penalization. Self-funded plans help companies rise above the fray, keeping their healthcare needs covered so they can focus on their business.
Have questions about whether self-insured plans are right for your organization – or just questions about self-insured plans in general? Contact us today for a free, no-obligation consultation. We’re happy to answer your questions.