Group is offering a MEC plan and is paying 100% for all FTE’s. Every employee is required to accept or Waive. All take coverage on November 1st , 2016. On December 1, 2016 an employee decides they want a minimum value plan that covers Hospitalization. Can they go to the exchange and if their income allows, qualify for a subsidy?
In short- if the employee enrolls in the MEC plan, then no- he/she would not be eligible for a premium tax credit. If the employee waived coverage in the MEC, yes- he/she would be eligible for a premium tax credit if the employer failed to offer a minimum value plan and the employee’s income qualified. Please see discussion below.
The key factor is whether the individual enrolls in the employer’s skinny MEC plan. If the employer offers the group plan to substantially all of the full-time employees, the employer will satisfy Penalty A (regardless of whether the employees enroll in the coverage). If the employee enrolls in the plan, he/she becomes ineligible for a premium tax credit. Section 36B(c)(2)(C)(iii) of the Internal Revenue Code (Refundable Credit for Coverage Under a Qualified Health plan) states:
“Employee or family must not be covered under employer plan. Clauses (i) and (ii) [related to affordability and minimum value] shall not apply if the employee (or any individual described in the last sentence of clause (i) ) is covered under the eligible employer-sponsored plan.”
Also, the preamble to the final Health Insurance Premium Tax regulations issued in May 2012 states:
“an eligible employer-sponsored plan is not eligible for the premium tax credit even if the plan is unaffordable or fails to offer minimum value.” (77 Fed Reg 30381)
If the employee waives the coverage, then the employee maintains their eligibility for a premium tax credit because they have not been offered minimum value coverage. If the employee received a premium tax credit (based on household income), this would trigger Penalty B for the employer. Because of this scenario, there was a concern that employers would automatically enroll full-time employees in a skinny plan. As a result, there is an anti-abuse rule in place. 26 CFR 1.36B-2(c)(3)(vii)(B) states:
“an employee or related individual is treated as not enrolled in an eligible employer-sponsored plan for a month in a plan year or other period for which the employee or related individual is automatically enrolled if the employee or related individual terminates the coverage before the later of the first day of the second full calendar month of that plan year or other period or the last day of any permissible opt-out period provided by the employer-sponsored plan or in regulations to be issued by the Department of Labor, for that plan year or other period.”
As I understand, the employer would comply with the requirement to provide an opt-out opportunity.
If you would like some information for your company about minimum essential coverage plans (MEC) plans please contact us!