What You Need to Know about California's Exchange - Covered California One of the more important parts of the Affordable Care Act (ACA) are new, state-run, competitive health insurance ‘marketplaces’ also known as “Exchanges.” California’s health insurance marketplace is known as “Covered California.” This is where individuals and small businesses will be able to purchase private health insurance for 2014. Individuals and small businesses will still, however, still be to purchase plans through agents, brokers and directly through health insurance carriers just as they do today. How Affordable Care Act will Effect California Individuals and Families In the in the hopes of making coverage more affordable, many individuals seeking health insurance may get financial assistance or a subsidy to purchase health insurance plans from Covered California. The amount of assistance will be determined by an individual’s or families’ income level in relation to the Federal Poverty Level (FPL). Applicants with annual incomes between 134% and 400% of the Federal Poverty Level (FPL) will receive a subsidy. Those with an FPL under 134% FPL may be eligible for Medi-Cal. Regardless of a subsidy, by law the ACA requires that all California individuals and family members have qualifying health insurance in 2014. Enrollment in health plans effective in 2014 will begin on October 1, 2013 and end on March 31, 2014. This open enrollment period is generally the only time individuals will be able to obtain coverage for 2014 - either through Covered California or in the private market. There are, of course, certain life-changing events that allow for enrollment outside of open enrollment; e.g., the loss of a job, death of a spouse or birth of a child. Such events may allow a special enrollment period within sixty (60) days of the event. When an individual files their taxes they’ll need to show that they have some type of health coverage (an employer’s plan, an exchange plan, a Medicare or Medicaid plan) – unless they qualify for an exemption. If they don’t have coverage, they’ll pay a tax penalty that will get bigger over time. In 2014 the penalty will be $95.00 or 1% of taxable income, whichever is greater and capped at $285.00 per family. By 2016, it will jump sharply to $2,085 per family, or 2.5% of taxable income, whichever is greater. Individuals will pay penalties of $95 in 2014 that will climb to $625 in 2016. The Affordable Care Act's Effect on California Employers Covered California will also host a marketplace specifically designed for small businesses known as the ‘Small Business Health Options Program’ (SHOP). According to the ACA, ‘Small Business’ is defined as a company with 1-100 employees. However, the states have been given until January 1, 2016 to change the size of their Small Business market to 1-100 employees. For 2014, Covered California has therefore deemed those with 1 to According to the Affordable Care Act (ACA), there are three (3) provisions effective in 2014 that are the responsibility of the employer to implement in order to ensure compliance. The provisions are as follows: 1. Play-or-Pay: Starting on January 1, 2014, the ACA will require “Applicable Large Employers”– presently, companies that have employed an average of 50 or more full-time and/or full-time equivalent (FTE) employees during the preceding calendar year—to offer affordable health plan coverage to full-time employees (and to their dependents) or face a penalty if an employee receives federally subsidized coverage from Covered California. So as to afford employers sufficient time to extend coverage to dependents, employers will not be subject to penalties in 2014 for not offering dependent coverage if it takes steps in 2014 towards complying with this requirement. 2. Tax Reporting by Applicable Large Employers: Beginning in 2014, Large Employers were to file a return with the IRS that reports the terms and conditions of the health care coverage provided to the employer’s full-time employees. Recently, however, the IRS has backed-off on this reporting requirement. The first information returns will now be filed in 2015. The IRS will use this information to verify employer-sponsored coverage and the ACA’s penalty provisions for Large Employers. Every Employer Must Provide Specific Written Notice to their Employees by October 1, 2013 or Risk $100 Per Day in Penalties for their Non-Compliance The ACA requires that all employers subject to the Fair Labor Standards Act to provide all employees with a written notice about health insurance Covered California/the Exchange (known in our state as Covered California). By October 1, 2013 employers must give notice of the exchange to each employee. The notice must provide a description of Covered California, including contact information; a statement that employees may qualify for a tax credit to pay for the Exchange covered if the employer’s plan does not provide minimum value (i.e., when the share of benefit costs do not equal or exceed 60% of the costs of coverage); A statement regarding the financial and tax consequences of purchasing coverage and that the employee would have to forego the employer-paid portion of the premium (if any) if he did went into the Exchange. Every employee hired after October 1, 2013 must be given notice immediately within 14 days of their date of hire. There are two "Model Notices" that have been developed by the U.S. Department of Labor: One is for employers who presently offer of insurance to their employees (PDF); the other is for employers who do not (PDF). Both can be found by clicking on the links located in the prior sentence. And while the Department of Labor developed two model notices, there is no legal requirement that an employer use either - only that they whatever notice is used that it sufficiently describe the benefits of the exchange to the employee. The Department of Labor as also provided written guidance regarding their obligation to notify all employees about the exchange in "TECHNICAL RELEASE 2013-02. a. Most Employers are Subject to FLSA: The FLSA applies only to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce. You might think that this would restrict the FLSA to covering only employees in large companies, but, in reality, the law covers nearly all workplaces. This is because the courts have interpreted the term interstate commerce very broadly. For example, courts have ruled that companies that regularly use the U.S. mail to send or receive letters to and from other states are engaged in interstate commerce. Even the fact that employees use company telephones or computers to place or accept interstate business calls or take orders has subjected an employer to the FLSA. b. Failure to Comply May Result in a Significant Penalty: ACA has a $100 a day general “non-compliance” penalty. This general penalty requires employers to correct compliance failures within 30 days of discovery or self-report a $100 a day penalty for failing to comply on IRS Form 8928 for each day the employer failed to comply with a PPACA mandate. So failing to provide notices can get expensive. ____________ To stay informed about Covered California, how it evolves and the other issues that effect individual and group health insurance in California, visit www.GetCoveredCAInsurance.com or contact Margy Wenham Insurance Services, Inc. at Margy@MargyWenhamInsurance.com.
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