Will Your Organization Offer Affordable Health Insurance Next Year?

Will Your Organization Offer Affordable Health Insurance Next Year?

  • Learn how the ACA defines applicable large employers (ALEs).
  • Discover the ACA’s minimum requirements of ALEs to their employees.
  • Find out how the IRS’s recently announced indexing adjustments for critical percentages under the ACA may affect your organization.

The IRS recently announced 2021 indexing adjustments for some critical percentages under the Affordable Care Act (ACA). This makes now a good time to review whether your organization is an applicable large employer (ALE) under the ACA. If so, will you offer affordable health insurance coverage to employees as defined by the law? Fiducial has the information you need to know.

On being an ALE

The ACA determines an employer’s size in any given year by its number of employees in the previous year. Generally, does your organization have 50 or more full-time or full-time equivalent employees on average during the previous year? Then, the ACA considers you an ALE for the current calendar year. The ACA defines a full-time employee as an individual employed on average at least 30 hours of service per week.

Under the ACA, an ALE must offer some specifics. They must offer minimum essential health insurance coverage considered affordable and providing minimum value to its full-time employees and dependents. If not, the employer may be subject to a penalty if at least one of its full-time employees receives a premium tax credit for buying individual coverage through a Health Insurance Marketplace (commonly referred to as an “exchange”).

Will your organization offer affordable health insurance next year according to the ACA?

Indexed amounts and affordable health insurance coverage

The required contribution percentage used to determine whether employer-sponsored health insurance coverage is affordable for purposes of employer shared responsibility under the ACA was recently indexed. It will increase from the 9.5% baseline to 9.83% for 2021 — and this is an increase from 9.78% for 2020.

Similarly, the percentages used to determine the amount of household income that individuals eligible for premium tax credits must contribute toward the cost of Health Insurance Marketplace coverage will increase. These increases include both the baseline and the 2020 percentages. The percentages vary across household income bands; for 2021, the adjusted percentages range from 2.07% to 9.83%.

Unlike many indexed amounts, these adjustments require consideration of two independent variables. The variables include the growth rate of health insurance premiums relative to growth in the consumer price index. Therefore, the percentages don’t necessarily increase every year, and ALEs must wait for the IRS announcement to confirm each year’s percentage. The ACA penalty amounts are also indexed, but the indexed amounts for 2021 haven’t yet been released.

Even more important

Given the increased attention to health care benefits this year because of the COVID-19 pandemic, it’s even more important to mind all the compliance details of your coverage. Need more information about your obligations for affordable health insurance under the ACA and assessing the costs associated with the health insurance you offer? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations. Ready to book an appointment now? Click here. Know someone who might need our services? We love referrals!

For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.