February 2013

                        


 
PPACA Update:
 
Is Your Group Health Plan "Affordable"?
  
  

 

We are getting alot of calls from our client base and prospective clients wondering how the PPACA will effect what they need to contribute to their employee based health insurance program after 2014.  While there are many outstanding requirements still coming down the pipeline from PPACA, we do know how to calculate whether or not your plan will be deemed "affordable" per the legislation.   

 

An employee can pay no more than 9.5% of his/her Adjusted Gross Income (AGI) towards their plan contribution after 2014

So how exactly does this look?  Please consider the following examples....

Company XYZ has 30 full time employees and they offer a group health insurance program to their employees that meets the "essential minimum benefit" requirements of the PPACA.  The total cost of the employer based health plan, per segment, is as follows:

  • Single Employee Rate - $400 per month
  • Two Person Rate - $900 per month
  • Family Rate - $1200 per month

 Now let's assume that your lowest paid employee makes $30,000 per year as a Single Employee Rate

  • $30,000 per year @ 9.5% = a contribution no greater $2850 per year/$237.50 per month for the "Single Employee Rate" only
  • This employee can be responsible for the full cost of adding their dependents to the plan
  • Based on the sample rates above, this means that the employer can pay as little as $162.50 of the Single Employee Rate of $400 per month and the plan will be deemed "Affordable"
  • The employee making $30,000 per year can pay up to $237.50 per month and the plan will be deemed "Affordable"

Now let's assume that your lowest paid employee makes $30,000 per year as a Two Person Rate

  • $30,000 per year @ 9.5% = a contribution no greater $2850 per year/$237.50 per month for the "Single Employee Rate" only
  • This employee can be responsible for the full cost of adding their dependents to the plan
  • Based on the sample rates above, this means that the employer can pay as little as $162.50 of the Two Person Rate of $900 per month and the plan will be deemed "Affordable"
  • The employee making $30,000 per year can pay up to $737.50 per month and the plan will be deemed "Affordable"

 Finally, let's assume that your lowest paid employee makes $30,000 per year as a  Family Rate

  • $30,000 per year @ 9.5% = a contribution no greater $2850 per year/$237.50 per month for the "Single Employee Rate" only
  • This employee can be responsible for the full cost of adding their dependents to the plan
  • Based on the sample rates above, this means that the employer can pay as little as $162.50 of the Two Person Rate of $1200 per month and the plan will be deemed "Affordable"
  • The employee making $30,000 per year can pay up to $1037.50 per month and the plan will be deemed "Affordable"

If you are looking at the affordability of these contribution payments mandated by the PPACA and wondering "how can an employee making $30,000 per year afford to pay $1037.50 per month for their family's health insurance" you are not alone.  Under the new law, a family making up to 400% of the Federal Poverty Level (FPL) may qualify for a government subsidy to purchase individual health insurance through the Health Insurance Exchange.  However, if an employee is offered "affordable" coverage from their employer and decides they cannot afford it (i.e. $1037.50 per month for a family making only $30,000 per year) they will forfeit their subsidy if they try to acquire health insurance through the Health Insurance Exchange.

To clarify further:

  • As an employer, you offer group health insurance to an employee and his family for $1037.50 per month
  • That employee cannot afford to pay $1037.50 per month for his family's health insurance
  • That employee waives group coverage due to the cost
  • That employee, who based on his income of $30,000 would qualify for a individual health insurance subsidy in the Health Insurance Exchange, will not get that subsidy because he waived "affordable" coverage from the employer at $1037.50 per month

So how does your plan stack up to these "affordability" calculations?  Are you paying more than you need to or not enough?  The PPACA experts at Altruis Benefit Consulting can help you identify discrepancies in your plan and contribution practices to determine if you are compliant.  If you have not updated your employee benefit strategy to ensure that you are complying with the PPACA you could be subject to thousands of dollars in tax penalties. 

 


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877.442.5878 | www.altruisbenefit.com | info@altruisbenefit.com

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