Healthcare

Next year is a big one for Obamacare, as several major changes are set to go into effect. Specifically, more employers are now required to offer health coverage to full-time employees, penalties for not obtaining coverage are more severe, and your healthcare premiums may rise significantly. Here's what you need to know about these changes, as well as what the future may have in store.

More employees are required to offer health coverage
One of the biggest Obamacare changes for 2016 is the employer mandate to offer coverage. Under the mandate, employers must offer coverage to full-time employees (FTEs) -- defined as those who work at least 30 hours a week -- and their children that will cover at least 60% of healthcare costs. And if the premium for such coverage will exceed 9.5% of an employee's modified adjusted gross income (MAGI) for those using a safe-harbor provision under the law or 9.66% for those who aren't, the business must offer a subsidy to make up the difference.

The employer mandate is already in effect for 2015, but in 2016 it will cover more businesses and more employees. The rules depend on the number of full-time employees a business has:

  • Businesses with 100 or more employees will need to offer coverage to at least 95% of FTEs in 2016, up from 70% in 2015.
  • Businesses with more than 50 employees but fewer than 100 will also need to offer coverage to at least 95% of FTEs. These businesses were previously exempt from the mandate.
  • Businesses with 49 or fewer employees continue to be exempt. Part-time employees are also exempt.

The fines for non-compliance are severe, at $2,000 to $3,000 per full-time employee. It will be interesting to see how this plays out. One major fear of Obamacare critics is the potential for employers to cut hours to reduce the number of FTEs, therefore maintaining exemption from the rule. This has been happening already, but this year will be the one to watch.

Obtain health insurance -- or else
Since 2014, there has been a tax penalty assessed on individuals who fail to maintain a minimum level of health insurance for themselves and their family. However, the penalties of 2014 and 2015 seem relatively minor when compared with the penalty in 2016 and beyond.

For 2016, the penalty for not having coverage will increase from $325 to $695 per adult, and from $162.50 to $347.50 per child, up to a per-family maximum penalty of $2,085. For higher-income families, the penalties can be even more severe, as it is assessed as the higher of the calculated family penalty amount or 2.5% of MAGI, up to an absolute maximum equal to the national average annual cost of a Bronze plan in the Marketplace. Beyond 2016, the penalty will adjust to keep up with inflation.

Year

Penalty Per Adult

Penalty Per Child

Maximum Penalty Amount

Or % of MAGI (If Higher)

2014

$95

$47.50

$285

1%

2015

$325

$162.50

$975

2%

2016

$695

$347.50

$2,085

2.5%

It's worth noting that the same exemption categories that applied in 2015 will continue to be valid in 2016. These include such reasons as:

  • The lowest-priced coverage available to you would cost more than 8.13% of your household income, up from 8.05% in 2015.
  • Your income is below the requirement to file a tax return.
  • You were uninsured for no more than two consecutive months during the year.
  • You are a member of a recognized religious group that has an objection to insurance.
  • You are incarcerated.
  • You are living abroad.
  • You experienced a qualifying hardship, such as homelessness, foreclosure, domestic violence, the death of a close family membership, or any other hardship listed at www.healthcare.gov.

Premiums are rising in 2016 -- or are they?
There is a general consensus that Obamacare premiums are going to increase in 2016, but the exact amount of the increase depends on who you ask.

According to research from the Kaiser Family Foundation, the average premium for the second cheapest "silver" plan is going up by 10.1% for 2016. Insurance comparison site HealthPocket found that premiums for bronze and silver plans are going to increase by 11% and 10%, respectively. On the other hand, the U.S. Health and Human Services department says that the average premiums for bronze plans are rising by just 7.2%, and that 86% of current HealthCare.gov customers can reduce their premiums by comparison shopping.

Regardless of the actual amount, it seems clear that premiums will indeed rise in 2016. However, that doesn't tell the entire story.

It's important to keep in mind that approximately 80% of Obamacare users qualify for a subsidy, and research indicates that people who receive a subsidy won't see any increase to their healthcare premiums in 2016. The aforementioned Kaiser Family Foundation study found that after subsidies, silver premiums are decreasing slightly in 2016. In a separate analysis, Avalere Health also found that subsidies will make up for the anticipated premium increases.

The biggest changes could be coming in 2017
While these changes are significant and will affect millions of Americans; the most drastic changes are possible in 2017. Specifically, the outcome of the presidential election in November could have massive implications for the future of healthcare in America. Some candidates not only are in favor of the Affordable Care Act but also want to expand its effects, while others either want to replace Obamacare with alternate systems or repeal Obamacare altogether. Either way, massive changes could be in store when the next commander-in-chief takes office in 2017.

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