In late August, the IRS issued final regulations on the individual mandate and Health Insurance Marketplace premium subsidies, both of which take effect in 2014.
The final regulations largely adopt the proposed regulations issued on February 1, 2013. Recall that while employers received a one-year delay from the shared responsibility penalty, individuals have received no similar delay. Starting in 2014, individuals who do not qualify for an exemption and have no health coverage will be subject to a $95 penalty for the year (half that amount for family members under age 18). The penalty increases significantly in 2015 and beyond.
Here are some highlights of the final regulations:
• Former employees who were once eligible for COBRA/state continuation or retiree coverage, but did not enroll in it and are not eligible for other employer-sponsored coverage, do not have minimum essential coverage (MEC) and can potentially qualify for a premium subsidy.
• For MEC purposes, a plan offered to an employee by an employer through a professional employer organization (PEO) or leasing company constitutes a plan offered to an employee on behalf of an employer.
• For purposes of determining subsidy eligibility, the characteristics used to identify the applicable plan include tobacco use, if relevant.
• The Nonappropriated Fund Health Benefits Program, provided to Department of Defense employees, is considered MEC.
The guidance on COBRA should be welcome news to many employers and COBRA qualified beneficiaries. People on COBRA often use group health plan benefits more than similarly situated active employees, resulting in adverse selection. Many who are offered COBRA may qualify for a premium subsidy in the Marketplace and thus be able to obtain coverage at a lower price tag than COBRA’s 102 percent of total cost. Keep in mind that the core employer COBRA requirements remain in force and will not go away in 2014 or any later year, absent additional legislation.