Labor and Employment Law: Current Developments

One of the most controversial elements of the Affordable Care Act has been the requirement that substantially all Americans obtain health insurance.  I find this controversy a bit curious.

People become ill, suffer diseases, and experience accidents and other trauma whether they are insured or not.  Those without insurance often go to a hospital emergency room for treatment.  Under the Emergency Medical Treatment and Active Labor Act (EMTALA) (42 U.S.C. § 1395dd (2006)), anyone who seeks emergency treatment in a hospital which participates in Medicare and which has an emergency department must be examined.  Nearly all hospitals are affected.  If an emergency medical condition exists, the hospital must treat and stabilize the patient, either in its own facilities or by transfer to an outside facility.

Examination and treatment in the emergency room is expensive.   The only way a hospital can recover such costs is by passing them on to self-pay patients and those with insurance.  The result is that paying patients help subsidize the uninsured.

Under the Affordable Care Act, beginning January 1, 2014, the individual shared responsibility provision of the law (the “Individual Mandate”) requires each individual to have minimum level of healthcare coverage (known as “Minimum Essential Coverage”) Certain persons may be exempt from the requirement.  Those who fail to comply will be required to make a payment to the IRS when filing federal income tax returns.

Who is subject to the individual shared responsibility provision?

The Individual Mandate applies to individuals of all ages, including children. Adults or married couples who can claim a child or another individual as a dependent for federal income tax purposes are responsible for making the payment if their dependent does not have coverage or an exemption.

What counts as minimum essential coverage?

The Affordable Care Act does not require anyone to terminate group or individual health plan coverage which he has in effect.  Most individuals in the United States have health coverage today that will count as minimum essential coverage and they will not need to do anything more than continue the coverage that they have.

Any one of the following types of coverage meets the requirement of the Individual Mandate:

• Employer-sponsored coverage (including COBRA coverage and retiree coverage)
• Insurance coverage purchased by and individual directly from the provider
• Medicare coverage (including Medicare Advantage)
• Medicaid coverage
• Children’s Health Insurance Program (CHIP) coverage
• Certain types of Veterans health coverage
• TRICARE

Minimum Essential Coverage does not include specialized coverage, such as vision care, dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition, e.g., cancer coverage.

The Department of Health and Human Services has proposed that student health plans and coverage provided by foreign governments qualify under the Act, and other programs may also be deemed to qualify.

Exemptions from the Individual Mandate

The following persons are exempt from the Individual Mandate:

Religious conscience: Persons who are members of a religious group that is recognized as conscientiously opposed to accepting any insurance benefits are exempt.

Health care sharing ministry: Members of a recognized health care sharing ministry.

Indian tribes: Members of a federally recognized Indian tribe.

No filing requirement: Persons whose household income is below the minimum threshold for filing a tax return.

Short coverage gap: Persons who have gone without coverage for less than three consecutive months during the year.

Hardship: Persons certified to have suffered a hardship that makes the individual unable to obtain coverage.

Unaffordable coverage options: Persons who cannot afford coverage because the minimum amount for premiums, e.g., an employee’s share of premiums, is more than eight percent (8%) of household income.

Incarceration: Persons in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against them.

Not lawfully present: Persons who are not U.S. citizens, U.S. nationals, nor aliens lawfully present in the U.S.

Penalties for Non-Compliance

Individuals who are subject to the Individual Mandate, but who fail to comply are subject to penalties to be paid to the Internal Revenue Service.

Annual penalties for individuals and their dependents over age 18 are the lesser of:

• Premium equivalent.  An amount equal to the national average premium payment for the applicable tax year for “bronze level” qualified health plan coverage (bronze level coverage provides the equivalent of 60 percent of the full actuarial value of plan benefits); or
• Percentage of income or flat penalty.  A percentage of individuals’ income or the annual flat penalty amount, whichever is greater

Annual penalties for those under age 18 are one-half of the amount for those over 18

Given the cost of healthcare premiums, most persons subject to the penalty will likely pay the flat penalty or a percentage of income. The penalties are phased in over three years.

Individuals will not be subject to penalties if:

• Premiums are too high.  Their annual required health care coverage premiums exceed 8% of their household income for the taxable year;
• Income is too low.  Their income for the taxable year is low enough that they are not required to file an income tax return;
• Not qualified due to hardship.  They are unable to obtain qualified health plan coverage due to a hardship as determined by the federal Secretary of Health and Human Services; or
• Certain Indian tribes.  They are members of certain Indian tribes.

Persons who fail to comply cannot, however, be made subject to criminal prosecution by the IRS.