The Affordable Care Act became law in 2010, but the program has only slowly moved toward full implementation. Each year, existing aspects of Obamacare have changed, and new provisions have taken effect, and that has forced Americans to make sure they keep up to date on the latest information about the program.
To help keep you apprised of what's in store for the healthcare-coverage law in 2016, let's take a closer look at three major changes to Obamacare that will kick in with the new year.
Expansion of the employer mandate
The Affordable Care Act originally required employers with 50 or more employees working at least 30 hours a week to begin providing qualifying health insurance coverage to their workers by the beginning of 2014. As that deadline approached, the federal government decided to delay full implementation of the employer mandate. In 2015, large employers with 100 or more employees were required to offer qualifying coverage to at least 70% of their workforce, but mid-sized employers with 50 to 99 employees weren't required to take action.
For 2016, however, this will change. Large employers will see the required coverage percentage rise from 70% to 95% of their employees. In addition, mid-sized employers will have to start complying with the law and also meet the 95% requirement.
The stakes are high. Obamacare imposes penalties of $2,000 per full-time employee for employers who don't offer coverage, with an exclusion available for the first 30 employees. For companies offering insurance coverage that doesn't cover 60% or more of allowed costs or is not affordable, a reduced penalty equal to $3,000 per employee receiving a federal subsidy is available if it's less than the $2,000 per employee penalty calculation above, which can be the case if most of the employer's workers don't receive subsidies.
Increase in the individual mandate penalties
The requirements for individuals to have qualifying insurance will also get harsher in 2016, as penalties for lack of coverage will rise. In 2016, penalties will rise from $325 to $695 per adult and from $162.50 to $347.50 per child. The family maximum will jump from $975 to $2,085. The alternative calculation method using income above the tax filing threshold will rise from 2% to 2.5%, and if that amount is greater than what's calculated under the per-person method, then the penalty will be the higher amount -- even if the income-based calculation exceeds the family maximum under the per-person method.
The same exemptions to avoid the individual mandate penalties will still be available, with various provisions related to income levels and other types of financial and personal hardships allowing you to avoid having to pay a penalty. With the penalty amounts on the rise, the incentive to work toward taking advantage of those exemptions will be higher than ever.
Rising premiums for Obamacare policies -- but not after taking credits into account
Health insurance companies have reported financial challenges stemming from their providing coverage under Obamacare, with UnitedHealth (NYSE:UNH) publicly announcing that it was considering withdrawing from the program because of economic considerations. Most insurance companies have taken the less extreme step of requesting premium increases, and preliminary figures suggest that those boosts will be substantial.
According to the Kaiser Family Foundation, average premiums for the second-cheapest silver-tier plan in major cities across the 50 states and the District of Columbia will rise more than 10%. Because the increases are largely concentrated in states with relatively low populations, the weighted average change will be lower, but still significant at 3.6%.
In most areas, however, participants receiving subsidies won't see any increases. Only five states -- Arizona, Hawaii, Minnesota, New Mexico, and Tennessee -- will see after-credit premiums rise, and most of those cases involve situations in which participants in those states were paying less than the typical amount nationwide. What that means is that the federal government will end up paying more of the share of higher premiums to insurance companies, making the demand on the federal budget greater in 2016 than in past years.
Obamacare has become a constantly evolving law, and it can be confusing for participants and nonparticipants alike to figure out what they have to do from year to year. Obamacare's 2016 changes are important, but they won't be the last to affect those who rely on the Affordable Care Act for healthcare coverage.